Prediction: Microsoft Just Became One of Big Tech’s Best Values

Quick Read

• Microsoft (MSFT) reported Q3 FY26 revenue of $82.89B (up 18.3% YoY) with EPS at $4.27 beating estimates, Azure growing 40%, and AI business reaching a $37B annual run rate up 123% YoY. Bill Ackman disclosed a multi-billion-dollar stake citing attractive valuation.

• Microsoft trades at a 25x trailing multiple for a business growing earnings 23%, supported by a $627B contracted revenue backlog and potential margin expansion from GitHub Copilot’s shift to usage-based billing on June 1, 2026.

• The analyst who called NVIDIA in 2010 just named his top 10 stocks and Microsoft wasn't one of them. Get them here FREE.

Microsoft (NASDAQ:MSFT) trades at $421.92 after a rough start to 2026, down 11.26% year to date and 8.54% over the past 12 months. Our 24/7 Wall St. price target for Microsoft is $510, implying roughly 20.9% upside over the next 12 months. Our recommendation is buy, with a confidence level of 70%. The AI capex story still has more runway than the share price implies.

24/7 Wall St. Price Target Summary

A Reset Year for the AI Leader

Microsoft has spent 2026 digesting its meteoric 2025 run. The stock sits well below its 52-week high of $552.24 and roughly 9% below its 200-day moving average of $461.91, even after gaining 1.7% over the past week.

Fiscal Q3 2026, reported April 29, 2026, was a clean beat. EPS came in at $4.27 versus $4.07 expected and revenue hit $82.89 billion, up 18.3% year over year. Azure grew 40%, and CEO Satya Nadella highlighted that the "AI business surpassed an annual revenue run rate of $37 billion, up 123% year-over-year."

The analyst who called NVIDIA in 2010 just named his top 10 stocks and Microsoft wasn't one of them. Get them here FREE.

Bill Ackman recently disclosed a multi-billion-dollar stake citing attractive valuation and AI-driven growth, and a UK antitrust probe into cloud practices remains an overhang.

The Case for $560 and Higher

Azure is compounding at 39% to 40%, AI revenue is tracking a $37 billion run rate growing 123%, and the June 1, 2026 shift of GitHub Copilot to usage-based billing could convert capex into margin expansion.

The PEG ratio of 1.29 looks reasonable for a 30%+ ROE business. If forward EPS reaches roughly $21 in FY27 and the market reapplies a 27x multiple, MSFT prints the $560.88 consensus target. Continued AI capex payoff plus easing supply constraints could push shares toward $600.

The Risks Worth Watching

The bear case starts with capex. CapEx hit $30.88 billion in Q3 FY26, up 84% year over year, and OpenAI-related losses are climbing ($3.1 billion in Q1 FY26 versus $523 million prior year). A former Microsoft VP recently argued the company "missed the AI wave" with only 3.3% Copilot paying users.