Street Reassesses Microsoft (MSFT) Amid Azure Growth and Capex Concerns

Microsoft Corporation (NASDAQ:MSFT) is among the best machine learning stocks to buy according to analysts. On February 5, Bloomberg reported that Stifel downgraded Microsoft’s rating from Buy to Hold and cut the price target by nearly 27%, to $392 from $540. With this, Stifel has joined the 5%-6% of analysts who hold a cautious view, out of 64 covering the stock (per CNN.com data).

In his note, Stifel analyst Brad Reback argued that consensus expectations for 2027 “are too optimistic,” amid concerns over the growth of its cloud business. Reback believes that because of “the well-documented Azure supply issues, coupled with Google’s strong GCP/Gemini results,” and “growing Anthropic momentum,” Microsoft’s Azure business is unlikely to witness accelerated growth.

Additionally, the analyst believes that the aggressive spending to expand its artificial intelligence capabilities is “likely to be a headwind” to operating-margin leverage. On the prospects for the stock, the analyst told investors:

We see no near-term catalysts and expect the stock to be range-bound until either capex growth slows below Azure growth and/or Azure posts a significant acceleration.

The company reported Q2 FY26 results in late January, which showed a slowdown in cloud sales growth and elevated capital expenditures. These two have been fresh concerns for investors, who continue to question the potential payoff from such significant spending.

The stock has corrected by around 14% since it reported results, through February 10. Apart from Stifel, most other analysts reiterated their ratings on the stock, with Philip Securities even upgrading it to a Buy, as they believe the correction presents a good entry opportunity. As of February 10, the stock commands a consensus 1-year median price target upside of nearly 45%.

Microsoft Corporation (NASDAQ:MSFT) is a global technology company that develops and sells a wide range of software, cloud services, devices, and business solutions, serving both individual users and enterprise customers worldwide. Its flagship products include Windows, Microsoft 365, Azure, LinkedIn, and Xbox.