Microsoft Stock Faces Price Target Revising as AI Spending Debate Intensifies

The Microsoft Stock Price Target Adjustment

Microsoft (NASDAQ: MSFT) recently released its FY 2025 Q1 report, showcasing impressive earnings that generally surpassed estimates. However, this performance has spurred discussions around the justifiability of the company's significant AI spending.

Analysts' Perspectives on Microsoft Stock

• Karl Keirstead of UBS retained a 'Buy' rating but revised his target to $500 from $510, signaling a potential upside of 22.72%.
• Mark Murphy from JPMorgan reiterated an 'Overweight' rating, adjusting the target to $465, a 14.13% increase, citing stable results.
• Keith Weiss of Morgan Stanley raised his outlook from $506 to $548, dismissing concerns about short-term hurdles.

Investors' Response to Strong Earnings

Despite a reported EPS of $3.30 representing a 10% YoY increase and a revenue of $65.6 billion (16% YoY growth), investor sentiment has faltered. A notable decline in share price followed the guidance provided, which suggested lower Azure growth expectations.

Concerns Surrounding AI Investments

Microsoft's CFO highlighted that AI capacity issues may not be resolved until the latter half of the fiscal year, intensifying market apprehensions. The company’s substantial investment of $30 billion in AI infrastructure raises questions about the immediate viability of these expenditures, mirroring sentiments expressed by major competitors such as Meta, Amazon, and Google.

Final Insights on Microsoft Stocks

The stock market's current bearish trend regarding Microsoft reflects broader worries about the sustainability of aggressive AI investments, impacting the overall outlook for MSFT in the near term. Investors are urged to keep an eye on upcoming earnings reports and further guidance on AI spending.