Is Microsoft Back on Its Way to the $4 Trillion Club? Wall Street Seems to Agree on an Answer.
Key Points
Microsoft has a large backlog of customers waiting for capacity on its cloud platform to become available.
Microsoft projects that it will spend over $100 billion on capital expenditures this year.
Q1 2026 was the company's worst first quarter since the financial crisis.
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I hate to state the obvious, but it has been a less-than-ideal start to the year for Microsoft (NASDAQ: MSFT) stock. As of April 9, the stock is down 22% year to date. The only "Magnificent Seven" stock to start the year worse is Tesla (NASDAQ: TSLA), which is down nearly 23%.
Microsoft's slump so far has been driven by a combination of things, including its artificial intelligence (AI) spending plans and a broader tech sector sell-off. But despite the stock's worst start to the year since the 2008 financial crisis, a few Wall Street analysts believe it is due for a good rebound and then some.
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Where some analysts think Microsoft's stock is headed
In recent reports, here is where analysts from three prominent Wall Street companies set their price targets for Microsoft:
| Company | Microsoft 12-Month Share Price Target |
|---|---|
| Jeffries | $675 |
| Morgan Stanley | $650 |
| Goldman Sachs | $600 |
Data source: Analysts' reports.
As of market close on April 8, Microsoft's stock was just above $374, giving it a market cap of $2.78 trillion. If it were to hit each of those three price targets, here's where its market cap would sit:
- $675 (up 80.5%): $5 trillion.
- $650 (up 73.8%): $4.8 trillion.
- $600 (up 60.4%): $4.5 trillion.
Where Microsoft's growth is going to come from
You can make the case that Microsoft's stock was due for a correction because it was trading at a high premium. You can't make the case that Microsoft's recent business performance or its outlook warranted it losing more than a fifth of its value to start the year.
In these analysts' reports, one common theme is optimism about Microsoft's cloud business. And I agree with them. Much of its future growth will come from its cloud platform, Azure. Right now, Azure has a good problem: Its backlog is piling up, but it doesn't have enough capacity to take on all the customers who want to use its data centers and platform.
Its commercial backlog was $625 billion at the end of 2025, though 45% of that came from its OpenAI contracts. The concentration of revenue coming from (and due to come from) that single customer isn't ideal, but there are worse problems to have. OpenAI plans to spend around $600 billion on computing power through 2030, and as one of its cloud providers, Azure stands to gain a lot from this spending plan.
Increasing demand for cloud and AI services is largely why Microsoft projects that it will spend over $100 billion on capital expenditures this year to build out its cloud and AI infrastructure. Those outlays might cut into its short-term free cash flow, but they will put it in a better position to capitalize on the growth of the AI ecosystem.
Business success doesn't always translate to stock success, but Microsoft has the growth opportunities that should eventually put the stock back on an upward trajectory.
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Stefon Walters has positions in Microsoft. The Motley Fool has positions in and recommends Goldman Sachs Group, Microsoft, and Tesla. The Motley Fool has a disclosure policy.
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