--- title: "Is AI spending too much and being criticized? Analysts say: Microsoft has been unfairly punished, and the stock price is expected to rebound by 26%" type: "News" locale: "en" url: "https://longbridge.com/en/news/283946954.md" description: "Microsoft's stock price has fallen by about 20% since last August. Analyst Bohdan Kucheriavyi believes this sharp decline is an emotional overreaction, and the long-term investment value is underestimated. Despite Microsoft's impressive financial report and continuous revenue growth, the market is overly focused on its investments in AI infrastructure. It is expected that the third-quarter performance next week will continue to show steady results, with Azure cloud business growth potentially exceeding expectations" datetime: "2026-04-24T06:48:08.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/283946954.md) - [en](https://longbridge.com/en/news/283946954.md) - [zh-HK](https://longbridge.com/zh-HK/news/283946954.md) --- # Is AI spending too much and being criticized? Analysts say: Microsoft has been unfairly punished, and the stock price is expected to rebound by 26% According to Zhitong Finance APP, since August last year, Microsoft's (MSFT.US) stock price has fallen by about 20%. Seeking Alpha analyst Bohdan Kucheriavyi believes that this round of decline is a typical emotional overreaction, and the long-term investment value is underestimated. During the stock price decline, Microsoft continuously delivered impressive financial reports, with double-digit percentage revenue growth in both the first and second fiscal quarters, consistently exceeding market expectations. Despite the improving fundamentals, Microsoft's stock price has weakened in recent months. The core reason is the market's excessive focus on Microsoft's massive investments in AI infrastructure. Additionally, the situation in Iran has driven up oil prices, and the deteriorating macro environment has further dragged down the overall performance of technology stocks. Considering the huge backlog of orders and the continuously rising demand for cloud computing, Microsoft's third-quarter performance, to be released next week, is expected to continue its robust performance. **Market Reaction is Severely Overdone** After Microsoft announced its second-quarter financial report at the end of January, it experienced a historic drop, but the operating data for that period was very impressive: revenue grew by 16.8% year-on-year to $81.3 billion, with earnings per share of $4.14, exceeding expectations by $0.22; cloud business revenue surpassed $50 billion, and the total remaining performance obligations increased by 110% year-on-year to $625 billion. Kucheriavyi emphasized that such rapid order expansion is extremely rare among mature technology companies. However, Microsoft admitted that the explosive demand for AI has led to insufficient computing power supply, which is also an important factor in this round of stock price decline. Due to capacity constraints, the company currently expects the growth rate of Azure in the third quarter (at constant exchange rates) to be between 37% and 38%. Considering that the growth rate in the second quarter was 38%, the growth rate of Microsoft's cloud business may show a quarter-on-quarter slowdown. The good news is that Azure's performance in the third quarter may exceed expectations and is expected to accelerate growth in the coming quarters. After all, Microsoft's second-quarter financial report indicated that demand for computing power continues to exceed supply, and capacity constraints are the only issue. In response to the shortage of AI computing power, Microsoft has taken several measures. Last year, Microsoft signed agreements worth over $60 billion with new cloud service providers such as Nebius (NBIS.US), CoreWeave (CRWV.US), Nscale, and Lambda to acquire external computing power. Earlier this month, Microsoft also announced an expansion of its cooperation with Nscale to further enhance computing reserves in the future. With external partnerships, Microsoft can quickly expand Azure's computing power scale without building data centers from scratch. If the third-quarter financial report shows that new computing power is gradually coming online, it means that the capacity bottleneck will continue to ease. This will also eliminate the biggest negative factor suppressing cloud business growth and dragging down Microsoft's stock price. The performance of other major Microsoft products is also worth looking forward to. The number of paid users for M365 Copilot has exceeded 15 million, a year-on-year increase of 160%. As Microsoft continues to add more features to Copilot, making it a powerful AI assistant, there is further potential for user growth. The third-quarter financial report may validate this Overall, Microsoft's fundamentals have not weakened, and the Q3 financial report to be released next week is likely to continue its steady performance. The market currently expects Microsoft's Q3 revenue to be $81.4 billion, a year-on-year increase of 16%; earnings per share are expected to be $4.06, a year-on-year increase of 17%. **What will happen to Microsoft's stock price next?** Currently, Microsoft's price-to-earnings ratio is about 25 times, which is at a low level in recent years. Kucheriavyi estimates based on the DCF model (Discounted Cash Flow model) that Microsoft's current fair valuation is $533.80 per share, about 26% higher than the current stock price. DCF valuation estimate based on Microsoft's performance ![image.png](https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20260424/1777011136791296.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg) Wall Street analysts are even more optimistic about Microsoft's prospects, with an average target price of $578.92 per share, indicating an upside potential of 36%. ![image.png](https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20260424/1777010852862936.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg) However, Microsoft currently faces multiple challenges: the company's capital expenditures have increased significantly, and computing power constraints may limit cloud business growth. At the same time, nearly 45% of Microsoft's commercial orders are deeply tied to OpenAI, which has no short-term profitability prospects, and the long-term cooperation carries hidden concerns. In addition, ongoing geopolitical conflicts and increased risks of shipping disruptions in the Strait of Hormuz heighten global recession worries, which will also pose risks to Microsoft's business. Despite the objective existence of the above risks, Kucheriavyi remains confident that Microsoft's long-term growth logic has not changed. 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