Microsoft’s Azure Efficiencies Could Boost Margins Despite Capacity Delays, Bernstein Says – Analyst Sees Over 31% Upside In MSFT Stock

• Adjusted earnings rose to $4.89 per share, beating expectations of $4.72, according to Fiscal.ai.
• Microsoft reported $45.2 billion in capex and finance leases in Q1, below its own target of around $50 billion.
• Q1 Azure revenue surged 48%

Microsoft (MSFT) received favorable coverage from Wall Street on Thursday, after the technology giant reported stronger-than-expected first-quarter earnings, driven by strong cloud growth.

MSFT shares were up 2.8% in pre-market trading. The stock has been on a positive streak lately and is on track for a fourth consecutive-month gain.

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Bernstein Expects Azure Efficiencies To Benefit MSFT Margins 

Bernstein SocGen Group raised MSFT’s price target on Microsoft to $722 from $662, while maintaining an ‘Outperform’ rating, according to Investing.com. The new target implies more than 31% upside. The firm highlighted Microsoft’s ability to deliver strong Azure growth despite delays in expanding its data center capacity.

While capital expenditures were lower than expected due to delays in capacity additions, Microsoft drove efficiencies across Azure that enabled the Q1 earnings beat and the guidance for 49-50% growth next quarter. Bernstein expects these efficiencies to benefit margins and performance in future years.

Q1 Beat Driven By Azure, Cloud

Microsoft reported Q1 revenue of $92.28 billion, up 19% and ahead of Wall Street estimates of $90.61 billion. Adjusted earnings rose to $4.89 per share, beating expectations of $4.72, according to Fiscal.ai.

Azure revenue jumped 48%, Microsoft Cloud revenue climbed 30% to $63.9 billion, while adjusted Microsoft 365 Commercial Cloud revenue rose 18%. However, the Devices and Consumer business remained weak, with revenue declining 3%.

The company expects Q2 revenue to come in between $96 and $97.1 billion.

Microsoft reported $45.2 billion in capex and finance leases in Q1, and while up about 30% from a year earlier, it came in below the company’s own target of around $50 billion.

What Wall Street Is Saying

 Piper Sandler raised its target to $650 from $610 and maintained an ‘Overweight’ rating. The firm highlighted Microsoft’s ability to improve infrastructure efficiency and noted that daily Copilot users increased nearly 50% quarter-over-quarter.

Deutsche Bank reiterated its ‘Buy’ rating and $600 target, citing expanding AI adoption and monetization across Microsoft's products. Meanwhile, Morgan Stanley increased the target to $650 from $600, citing strong cloud growth and improving profitability despite elevated AI investments.

Retail Turns Bullish On MSFT

Retail sentiment surrounding MSFT on Stocktwits turned ‘bullish’ from ‘neutral’ over the past 24 hours, amid ‘high’ message volumes. MSFT was also among the platform's top trending tickers.

One user said that while MSFT is spending heavily, unlike many peers, it's showing growth and cash generation at the same time.

MSFT shares have gained more than 12% so far in 2026, outperforming the Roundhill Magnificent Seven ETF (MAGS), which is up 9%.

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