JPMorgan lowered its price target for Microsoft (NASDAQ:MSFT) to $550.00 from $575.00, while keeping an Overweight recommendation on the shares. The adjustment, announced Thursday, reflects the investment bank’s reassessment of Microsoft’s valuation even as it affirmed the company’s strategic strengths in cloud computing and enterprise software.
Analyst Mark Murphy, who led the review, evaluated Microsoft’s market position and medium-term prospects across cloud and enterprise offerings. Although the price target was reduced, JPMorgan emphasized that Microsoft retains a number of competitive advantages, summing up the firm as one that "enjoys a broad portfolio of strategic products, sits at the intersection of digital transformations and cloud adoption, and CIOs view it as the most critical and indispensable IT mega-vendor."
The bank acknowledged that Microsoft’s shares trade at a premium on a price-to-earnings basis, but it argued that the premium is supported by several factors highlighted in its analysis. Chief among these are recent faster organic revenue growth and strong free cash flow generation, attributes JPMorgan said help justify a higher-than-average valuation multiple.
JPMorgan also pointed to Microsoft’s "relatively stronger position within the enterprise" and stated its belief that the company "has pulled ahead of the pack with a state-of-the-art cloud platform." Those reasons underpinned the decision to maintain an Overweight rating despite the lower price target.
Microsoft’s fiscal second-quarter results preceded JPMorgan’s revision. The company reported solid overall financials, with revenue, earnings per share and operating margins coming in ahead of expectations. However, Azure and other Cloud Services revenue rose 38% year-over-year in constant currency, a pace described as slightly below what the market had anticipated.
In the aftermath of the quarterly report, several other financial institutions updated their Microsoft price targets. Deutsche Bank cut its target to $575 while retaining a Buy rating and cited Azure’s growth as falling short of lofty market expectations. Scotiabank lowered its target to $600 and kept a Sector Outperform rating, also referencing Azure performance. BMO Capital reduced its target to $575, calling Azure’s growth slightly disappointing. By contrast, Oppenheimer maintained an Outperform rating with a $630 price target, noting a positive outlook even with the Azure slowdown.
The sequence of target adjustments and the commentary from multiple analysts underscores the market’s focus on cloud growth trajectories and how those figures feed into valuation models. While Microsoft’s broader financial metrics outperformed expectations in the quarter, the pace of Azure expansion was the proximate driver behind several banks recalibrating targets and assessments.
Investors and market participants will likely continue to weigh Microsoft’s premium valuation against its growth profile, enterprise positioning and cash flow fundamentals as analysts update models in response to reported cloud performance.