New York, April 22, 2026, 14:22 EDT
- Investors zeroed in on Azure’s capacity, sending Microsoft shares higher in afternoon trade, brushing off top-line profit estimates.
- Bank of America stuck with its buy rating and $500 price target, pointing to Azure and Copilot uptake as the key things to watch.
- The risk hasn’t gone anywhere: AI spending keeps climbing, a pace that’s already making some investors uneasy. Microsoft’s backlog? OpenAI still takes up a big chunk.
Microsoft climbed Wednesday, gaining around 1.7% to $431.31 after Bank of America’s new call on the stock spotlighted Azure’s momentum, Copilot demand, and the heavy spending tied to AI infrastructure. Investors are watching with Microsoft’s fiscal Q3 numbers due out next week.
Timing is key here. Microsoft will announce its fiscal third-quarter results after the bell on April 29, and the numbers are being watched closely. Investors want to see whether all that AI investment is translating into an actual pickup in cloud growth, beyond just pushing up backlog.
Microsoft’s most recent quarter had ammunition for both bulls and bears. Revenue jumped 17% to $81.3 billion, with adjusted earnings at $4.14 per share. Microsoft Cloud notched $51.5 billion in revenue. Azure and related cloud lines climbed 39%—or 38% when you factor out currency moves. Meanwhile, commercial remaining performance obligation—future contracted revenue—shot up 110% to $625 billion.
The stock dropped after the report. Back in January, Reuters pointed to investors’ unease over record capital expenditures and cloud growth that barely exceeded forecasts—Microsoft’s capex landed at $37.5 billion for the quarter. “Revenues are up 17% and the cost of revenues are up 19%,” Eric Clark, who manages the LOGO ETF, told Reuters, flagging it as a potential long-term worry. Reuters
Bank of America’s Tal Liani is looking for Azure to notch a 37.5% year-over-year gain in third-quarter revenue, adjusted for currency—pretty much matching what the Street’s already penciled in, according to TheStreet. Liani’s group projects total revenue for Microsoft’s fiscal third quarter to land at $81.4 billion, and sees GAAP EPS coming in at $4.05. The team keeps a buy rating and sticks with a $500 price target.
The target isn’t just an Azure story. Liani also flagged Microsoft 365 Copilot adoption. Last quarter, TheStreet reported, Copilot had around 15 million seats—about 3.5% of all Microsoft 365 seats. Copilot, Microsoft’s AI-powered workplace assistant, handles drafting, search, and workflow automation tasks.
Fund managers aren’t aligned on the numbers. The Alger Capital Appreciation Fund—cited by Insider Monkey via Yahoo Finance—pointed to Microsoft as a drag on results, even though revenue and earnings topped forecasts. The culprit, according to Alger: Azure growth that didn’t quite keep up with lofty expectations. Management, the fund noted, chalked up the miss to supply constraints and resource allocation issues rather than a drop in demand.
Microsoft’s top brass haven’t let up on the AI narrative. Back in January, Chief Executive Satya Nadella called it “only at the beginning phases of AI diffusion.” Finance chief Amy Hood pointed to Microsoft Cloud revenue topping $50 billion as evidence of robust demand, adding that results topped forecasts on revenue, operating income and earnings per share. Microsoft
The bearish argument hasn’t gone away. On Tuesday, Seeking Alpha’s Konstantinos Kosmidis pointed out that Microsoft faced a downgrade tied to AI-driven capital spending, softer free cash flow, and anxieties over OpenAI exposure. Still, Kosmidis called those risks exaggerated and flagged the stock’s 25.1 times forward earnings multiple.
The other headache: competition. Reuters flagged fresh threats from Google’s Gemini and Anthropic’s Claude, both stepping up the pressure on Microsoft’s AI and software lines. Microsoft, Alphabet, Meta, and Amazon are now on track to pour over $500 billion into AI this year, a staggering sum that pushes Microsoft’s cloud rivals into the same high-stakes spending sprint. Customers, though, suddenly have more choices on where to pick up compute power and AI services.
But the negatives are straightforward. Should Azure’s growth just hit forecasts, Copilot seat adoption stall out, or AI infrastructure expenses bite deeper into gross margins, holding the $500 price call gets tough. Liani flagged risks like short-term margin squeeze, rivals pushing out new AI apps and models faster, and the ever-cyclical pace of enterprise software budgets.
Right now, it’s not really about Microsoft clearing profit estimates by a slim margin. What investors are watching: signs that fresh AI infrastructure is rolling out, clients are actually adopting it in big numbers, and those hefty investments aren’t outpacing the sales growth.
