According to Zhitong Finance APP, Microsoft (MSFT.US) has been largely overlooked by the market since its last earnings report, but the &#34;cloud outlook&#34; during this week's earnings release may be just the opportunity needed to drive its stock price back up. The company will announce its first-quarter results for fiscal year 2026 on October 29, Eastern Time, and investors expect the company to once again deliver results that exceed expectations.
After announcing its earnings report at the end of July, Microsoft's stock price briefly surpassed the $4 trillion market cap threshold during intraday trading, but then lost momentum. As of now, Microsoft's stock price is around $520, remaining basically flat since the release of its fourth-quarter earnings report for fiscal year 2025, while the Nasdaq Composite Index has risen nearly 9% during the same period.
Wall Street expects its profits to grow by nearly 11%, which is considerable for a giant like Microsoft. This is mainly due to the strong performance of the Azure cloud computing division. According to FactSet data, analysts expect revenue from this division to surge more than 30% year-over-year.
Intelligent Cloud Business Maintains High Growth
UBS analyst Karl Keirstead wrote, &#34;The attitudes of enterprise customers and partners have improved again, and large Azure partners indicate that the growth trend is accelerating.&#34; He has a target price of $650 for Microsoft, which is 25% higher than the current stock price. He expects the collaboration between Microsoft and ChatGPT developer OpenAI to further improve Azure's outlook in the coming years.
For the entire Microsoft stock, the main &#34;driving factor&#34; is often whether Azure can maintain a year-over-year growth of about 37%, as the management team has predicted for the first quarter of fiscal year 2026.
<img src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20251027/1761555358752596.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="image.png" original-src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20251027/1761555358752596.png"/>
Some are concerned that Microsoft's investment in this technology is too large, as a lack of spending discipline could ultimately harm profit margins.
However, CFRA Research analyst Angelo Zino is not worried about this; he rates Microsoft as &#34;Strong Buy&#34; with a target price of $620. In a recent report, he suggested that Microsoft's capital expenditure growth should slow down next year, and future spending plans should &#34;shift more towards servers/hardware, which should also support more profitable AI growth.&#34;
&#34;Azure is likely to maintain strong growth in 2026 and beyond,&#34; Zino wrote, &#34;the contribution of AI services to total sales will continue to increase in the coming years,&#34; potentially reaching high double-digit percentages.
Valuation Remains Average
Even though Microsoft's stock price is very close to its historical peak and has steadily risen for three consecutive years, this does not necessarily mean that its valuation is too high
Since 2025, Microsoft's stock price has risen nearly 25%, while Apple and Amazon's performance has lagged this year. Nevertheless, based on its expected earnings for the next fiscal year, its price-to-earnings ratio is about 28 times, which, while not cheap, is still reasonable and consistent with its five-year average.
<img src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20251027/1761555438570335.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="image.png" original-src="https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20251027/1761555438570335.png"/>
Jack Seltz, the fund manager of Allspring LT Large Growth ETF, stated that he believes Microsoft's recent poor performance is &#34;unreasonable, considering its dominance in Azure and cloud computing.&#34; Microsoft is the second-largest holding in the fund.
&#34;Cloud&#34; is coming to light
Mizuho Securities analyst Jordan Klein views Microsoft as a prime example of a high-quality tech stock with &#34;real AI upside potential and growth&#34; and &#34;super compelling&#34; long-term buy value.
Since its last earnings report, Microsoft has been largely overlooked by the market. However, if the earnings report set to be released this week can present a certain outlook, it may be just the opportunity needed for its stock price to regain upward momentum

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Microsoft will announce its first-quarter results for the fiscal year 2026 on October 29, and investors expect it to exceed expectations once again. Although the stock price remains flat around $520, analysts are optimistic about the strong performance of the Azure cloud computing division, expecting revenue to grow by more than 30% year-on-year. UBS analysts predict a target price of $650 for Microsoft, while CFRA Research analysts have given it a "strong buy" rating with a target price of $620

- Microsoft is set to release its Q1 2026 earnings on October 29, with expectations of exceeding forecasts, driven by strong performance in its Azure cloud division.  
- Analysts predict a nearly 11% profit growth, with Azure's revenue expected to surge over 30% year-on-year, bolstered by improving client attitudes and partnerships.  
- Despite concerns over spending discipline, analysts maintain positive ratings, suggesting that Azure's growth potential and AI services will significantly contribute to future sales.

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Earnings Preview | Can Microsoft "Cloud" See the Day, Reignite Stock Price with AI?