KeyBanc has trimmed its price target on Microsoft to $600.00 from $630.00 while keeping an Overweight rating on the shares. The revised target implies material upside relative to Microsoft’s most recent price of $481.63, and the company retains a "GREAT" overall financial health score according to InvestingPro data.
The adjustment from KeyBanc follows Azure delivering constant currency growth that fell short of market expectations. The research firm characterized the next quarter’s outlook for the cloud business as "even less inspiring," highlighting a near-term softness in demand or execution versus what investors had anticipated.
Despite these concerns at the platform level, Microsoft’s broader top-line momentum remains solid. The company has recorded overall revenue growth of 15.59% over the last twelve months, underscoring persistent underlying demand across its product set.
Previously, KeyBanc had pointed to capacity constraints as the primary limiter on Azure revenue growth. In its latest assessment, however, the firm flagged a new, internal prioritization issue: first-party AI initiatives appear to be receiving greater access to GPU capacity than third-party or enterprise cloud workloads.
KeyBanc noted that Microsoft’s first-party AI applications such as Copilot and internal research appear to be receiving higher priority in "the GPU pecking order" than previously anticipated.
The research house described this dynamic as creating a "short-term, long-term trade off." In its view, "the short-term pain is real," as some Azure customers or workloads may face delayed or constrained access to GPU resources. At the same time, KeyBanc expressed uncertainty about whether prioritizing internal AI projects will deliver the expected payoff over the longer horizon.
Microsoft’s most recent fiscal results offer a mixed backdrop to these analyst concerns. For the fiscal second quarter of 2026 the company reported earnings per share of $4.14, ahead of the $3.93 analysts had forecast, and revenue of $81.3 billion, surpassing the $80.23 billion estimate. Those beats point to continued execution across several business lines even as certain cloud metrics soften.
Truist Securities has reiterated its Buy rating on Microsoft, drawing attention to strong commercial demand and a dramatic increase in bookings. The firm highlighted that bookings rose by more than 230% year-over-year and noted a commercial remaining performance obligation of $625 billion, a metric it views as evidence of durable enterprise demand.
Other analysts have also updated their valuations in light of the quarter. Raymond James moved its price objective to $580 from $600 while maintaining an Outperform rating. That change explicitly followed Microsoft’s fiscal second-quarter report and reflected concerns that Azure’s growth and guidance were slightly below investor expectations.
Overall, the market is balancing Azure-specific headwinds tied to growth and GPU allocation with signs of resilient revenue and earnings performance across the company. Analysts differ in their near-term outlooks and in how they weigh potential long-term benefits from Microsoft’s prioritization of first-party AI investments.
What this means for markets and sectors
- Cloud computing - Azure growth dynamics and resource allocation are the immediate focus for investors.
- Enterprise software and AI - Prioritization of first-party AI applications could influence enterprise customers and the competitive landscape for AI services.
- Semiconductors/GPU supply chains - Shifts in GPU allocation within a large cloud provider may have ripple effects across hardware demand and vendor relationships.