TLDR
- Microsoft announces fiscal Q2 2026 results January 28 with Wall Street projecting $3.91 EPS and $80.28B revenue
- Analysts from Citi, Mizuho, Jefferies, and UBS lowered price targets but kept Buy ratings
- Stock rallied 4.1% Friday after UBS cut target to $600 while calling it a buy with 28% upside potential
- Massive AI deals with OpenAI ($250B) and Anthropic ($30B) expected to drive record RPO growth
- New Fairwater data centers in Atlanta and Wisconsin positioned as key Azure growth drivers
Microsoft’s fiscal second-quarter earnings arrive January 28. Analysts are watching how the company’s massive AI investments translate into cloud growth.
Wall Street forecasts earnings per share of $3.91, up 21% year-over-year. Revenue estimates land at $80.28 billion, marking 15.3% growth. The stock has climbed roughly 5% over the past year.
Several major firms adjusted their outlook recently. Citi analyst Tyler Radke trimmed his price target to $660 from $690 while keeping a Buy rating. He called MSFT a top mega-cap idea despite mixed reseller survey data.
Radke sees Azure beating Q2 expectations. His firm’s reseller survey showed more varied results than prior quarters. He cut non-Azure estimates citing softer PC forecasts.
Mizuho’s Gregg Moskowitz dropped his target to $620 from $640 but maintained his Buy stance. Channel checks revealed overall strength with solid public cloud metrics and robust AI adoption.
However, some checks pointed to slower spending. Moskowitz flagged rising investor worries about AI disruption pressuring software stock valuations.
Price Targets Range From $600 to $675
Jefferies analyst Brent Thill held his $675 target and Buy rating. He noted the stock dropped 18% since Q1 results despite announcing major AI commitments.
The stock’s valuation multiple contracted 23% as money flows into chip stocks. Microsoft revealed $250 billion in OpenAI deals and $30 billion with Anthropic.
Thill sees execution strength ahead. The company is expanding capacity aggressively this year while working through a strong backlog.
UBS analyst Karl Kierstead cut his target to $600 but kept a Buy rating. The move sparked a 4.1% stock jump Friday as traders focused on his bullish call predicting 28% gains.
Kierstead highlighted Fairwater AI data centers as growth catalysts. Atlanta’s facility launched in October. Wisconsin’s site goes live in Q1 2026.
Record Growth Metrics on Deck
His team visited Wisconsin recently. The trip led UBS to raise Q2 fiscal 2026 revenue guidance based on observed progress.
Thill projects Q2 FY26 remaining performance obligation will post the biggest quarter-over-quarter jump on record. The metric surged 51% to $392 billion in Q1 FY26.
OpenAI’s $250 billion commitment will fuel RPO expansion. Anthropic’s $30 billion Azure compute agreements add to the total.
Intelligent Cloud contains Azure. It’s the second-largest segment with 42% operating margins versus 58% for Productivity and Business Processes.
Wall Street shows a Strong Buy consensus with 32 Buy ratings and two Holds. The average target of $626.14 implies 34.4% upside potential.
Some analysts question software valuations. Concerns focus on whether AI spending justifies current prices. MSFT trades at 32 times earnings with 14% long-term growth forecasts.
Heavy capital spending is eating into free cash flow. The metric stands at 74% of net income, pushing the price-to-free cash flow ratio to 43 times.
The stock has pulled back from highs despite AI momentum. Investors are weighing growth prospects against valuation concerns as earnings approach.
