Goldman Sachs has reduced its price objective for Microsoft (NASDAQ:MSFT) to $600.00 from $655.00, while retaining a Buy recommendation on the shares. The new target sits well above Microsoft’s trading level of $481.63 but below the analyst high target of $730.
The bank’s adjustment followed Microsoft’s second-quarter fiscal 2026 report, which recorded $81 billion in revenue - a 17% year-over-year increase and roughly 1% ahead of analysts’ consensus. Non-GAAP earnings per share were $4.41, up 23% from the prior year and about 5% higher than the consensus estimate. These results align with the company’s recent pattern of steady growth, with InvestingPro figures showing revenue growth of 15.59% over the last 12 months and a five-year revenue compound annual growth rate of 15%.
Cloud performance remained a focal point. Microsoft reported Azure constant-currency growth of 38%, a touch above the Street’s 37% forecast, and guided Azure growth for the third quarter to a 37-38% range versus analysts’ expectations of 36%.
Despite the solid top- and bottom-line results, Goldman Sachs highlighted a significant increase in capital spending as the primary justification for lowering its price target. The firm pointed to $37.5 billion in capital expenditures, including financial leases, which it said was 9% higher than analyst projections. That elevated capex figure coincided with an after-hours stock decline of about 6%, according to Goldman.
The bank signaled that management appears to be prioritizing compute-related capital investments for first-party applications - notably for projects such as Copilot and internal R&D - over maximizing near-term Azure revenue expansion. Goldman suggested this allocation reflects a strategic emphasis on strengthening Microsoft’s AI capabilities and should produce stronger medium-term returns, even if it dampens short-term revenue leverage for the cloud business.
Other analyst reactions were mixed. Piper Sandler and KeyBanc both trimmed their Microsoft price targets to $600, citing concerns related to Azure’s growth trajectory despite the reported 38% constant-currency increase. By contrast, Stifel raised its target to $540 and pointed to capacity constraints as a limiting factor on Azure’s upside.
Truist Securities kept a Buy rating and assigned a $675 target, highlighting continued commercial demand and noting a substantial year-over-year rise in bookings. Truist also cited the commercial remaining performance obligation reaching $625 billion as evidence of durable enterprise demand.
DA Davidson observed that Microsoft outperformed on both revenue and earnings in the quarter. Taken together, the range of broker responses illustrates varied views among analysts about how Azure’s near-term growth and Microsoft’s increased capital outlays interact with the company’s longer-term AI positioning.
InvestingPro data referenced in the analysis assigns Microsoft an overall financial health score of "GREAT" and an analyst consensus recommendation of 1.24.
Implications
- Microsoft’s solid earnings and Azure growth illustrate continued demand across cloud and commercial segments.
- Higher-than-expected capex has prompted analysts to reassess near-term valuation, even as many maintain confidence in longer-term strategic investments in AI and compute.
- Market reactions and divergent analyst targets reflect a balance between short-term revenue metrics and medium-term investment priorities.