As we approach Microsoft’s fiscal first quarter 2026 earnings announcement scheduled for October 29, the company finds itself at a pivotal moment dominated by fierce competition for enterprise AI dominance, particularly against giants like Amazon and Google. Analysts remain optimistic about Microsoft’s prospects, highlighting its robust positioning in the market.
Wedbush analyst Daniel Ives has reaffirmed a Buy rating on Microsoft with a price target of $625, while TD Cowen echoes this sentiment with a slightly higher price target of $640. Both analysts aim to underscore that the stock has yet to reflect the anticipated financial gains resulting from Microsoft’s burgeoning AI initiatives.
The burgeoning AI space, particularly the Copilot initiative, which is expected to become a major revenue driver, is a focal point of their analysis. Ives posits that Copilot could see an impressive $25 billion in incremental revenue by fiscal year 2026—figures that are currently unaccounted for in the stock’s pricing.
“I believe FY26 will represent the true inflection year of AI growth for Microsoft,” Ives has noted, asserting that the Azure platform offers a superior value proposition amid its competitors.
With the consensus projecting 37% growth for Azure in constant currency for Q1 FY26, some analysts consider this estimate overly conservative, anticipating upward revisions in response to robust performance metrics. Microsoft is expected to engage in $30 billion worth of capital expenditures in the next quarter, establishing an impressive annualized investment pace of approximately $120 billion, reinforcing its commitment to AI infrastructure.
AI Infrastructure Investment Ramps Up
Microsoft’s ambitious investment aims to enhance data center capacities to accommodate surging demand for AI services. Ives predicts that within three years, over 70% of Microsoft’s install base will leverage AI functionalities across both enterprise and commercial platforms.
Moreover, TD Cowen recently reported intensified Azure data center operations, reflecting strong demand signals for AI. Their projections indicate Intelligent Cloud revenue growth of 25% in constant currency for the upcoming quarter, which marginally surpasses existing estimates.
As we look ahead to revenue forecasts, TD Cowen models Microsoft’s total Q1 revenue at $80.9 billion and earnings per share at $3.83, predicting results above the Street’s estimates of $80.1 billion and $3.80. A success rate exceeding 2% set by expectations could see Azure growth leap to 40%, further solidifying Microsoft’s foothold in the cloud sector.
The aggregate sentiment from analysts covering Microsoft remains overwhelmingly positive, with all 34 specialists categorizing the stock as a Strong Buy, and the average price target reflecting an enticing upside potential of approximately 21%. Ives, acknowledged among the top 4% of Street analysts, emphasizes that the current market valuations do not yet price in the forthcoming wave of growth in both cloud services and AI technologies.
With a formidable market cap of $3.9 trillion, Microsoft boasts a P/E ratio of 38.31, coupled with a revenue growth of 14.93% over the past year. These metrics point towards significant financial health, marking the company as a solid prospect in the evolving tech landscape.
