Royal Bank Of Canada Reiterates Outperform Rating for Microsoft (NASDAQ:MSFT)

Key Points

• Royal Bank of Canada reiterated its “outperform” rating on Microsoft and set a $640 price target, implying approximately 39.9% upside from the prior close. Analysts broadly remain positive, with a consensus “Moderate Buy” rating and average target of $558.64.
• Microsoft reported a quarterly earnings beat, with revenue of $90.01 billion and EPS of $4.74, while revenue grew 17.7% year over year. Azure growth exceeded expectations, and Microsoft 365 Copilot surpassed 30 million paid users, supporting its cloud and AI outlook.
• Microsoft shares rose 17.2% to $457.59, though investors still face elevated AI-related capital spending, regulatory investigations, cloud-security concerns and insider selling.

Microsoft (NASDAQ:MSFT - Get Free Report)'s stock had its "outperform" rating reissued by investment analysts at Royal Bank Of Canada in a note issued to investors on Thursday,Benzinga reports. They currently have a $640.00 target price on the software giant's stock. Royal Bank Of Canada's target price would indicate a potential upside of 39.86% from the company's previous close.

MSFT has been the subject of a number of other reports. CLSA reaffirmed an "outperform" rating on shares of Microsoft in a report on Thursday. Deutsche Bank Aktiengesellschaft restated a "buy" rating on shares of Microsoft in a research report on Monday, July 20th. HSBC decreased their price objective on shares of Microsoft from $593.00 to $571.00 in a research note on Thursday, April 30th. Wolfe Research reissued an "outperform" rating and issued a $550.00 price objective on shares of Microsoft in a report on Thursday. Finally, Wells Fargo & Company lifted their price objective on shares of Microsoft from $625.00 to $650.00 and gave the company an "overweight" rating in a research note on Thursday. Forty-two research analysts have rated the stock with a Buy rating and six have given a Hold rating to the company. Based on data from MarketBeat, the company currently has a consensus rating of "Moderate Buy" and an average target price of $558.64.

Microsoft Stock Up 17.2%

Shares of MSFT traded up $67.05 during midday trading on Thursday, hitting $457.59. The company had a trading volume of 83,742,032 shares, compared to its average volume of 37,416,223. Microsoft has a 1 year low of $349.20 and a 1 year high of $555.45. The firm has a market capitalization of $3.40 trillion, a P/E ratio of 27.27, a P/E/G ratio of 1.20 and a beta of 1.13. The company has a debt-to-equity ratio of 0.08, a quick ratio of 1.27 and a current ratio of 1.28. The company's 50-day simple moving average is $396.43 and its 200-day simple moving average is $405.74.

Microsoft (NASDAQ:MSFT - Get Free Report) last issued its quarterly earnings results on Wednesday, July 29th. The software giant reported $4.74 earnings per share (EPS) for the quarter, topping analysts' consensus estimates of $4.24 by $0.50. Microsoft had a net margin of 39.34% and a return on equity of 31.94%. The company had revenue of $90.01 billion during the quarter, compared to the consensus estimate of $87.62 billion. During the same quarter in the previous year, the firm earned $3.65 earnings per share. The firm's quarterly revenue was up 17.7% on a year-over-year basis. As a group, sell-side analysts expect that Microsoft will post 16.7 EPS for the current year.

Insider Activity

In related news, CEO Judson Althoff sold 15,500 shares of the company's stock in a transaction on Monday, June 1st. The stock was sold at an average price of $460.99, for a total value of $7,145,345.00. Following the completion of the transaction, the chief executive officer directly owned 110,477 shares in the company, valued at approximately $50,928,792.23. This represents a 12.30% decrease in their ownership of the stock. The transaction was disclosed in a document filed with the SEC, which can be accessed through the SEC website. Also, EVP Takeshi Numoto sold 4,500 shares of Microsoft stock in a transaction on Wednesday, June 10th. The shares were sold at an average price of $402.84, for a total transaction of $1,812,780.00. Following the completion of the transaction, the executive vice president owned 47,468 shares in the company, valued at approximately $19,122,009.12. This trade represents a 8.66% decrease in their position. Additional details regarding this sale are available in the official SEC disclosure. Insiders sold a total of 23,762 shares of company stock valued at $10,508,361 over the last quarter. Company insiders own 0.03% of the company's stock.

Institutional Trading of Microsoft

A number of hedge funds have recently made changes to their positions in MSFT. Longfellow Investment Management Co. LLC lifted its holdings in Microsoft by 51.3% during the 2nd quarter. Longfellow Investment Management Co. LLC now owns 59 shares of the software giant's stock worth $29,000 after buying an additional 20 shares during the last quarter. Bernzott Capital Advisors acquired a new stake in shares of Microsoft during the 4th quarter valued at approximately $34,000. Frankly Finances LLC bought a new position in Microsoft during the second quarter worth $35,000. Timmons Wealth Management LLC acquired a new position in Microsoft in the fourth quarter worth $36,000. Finally, Fairway Wealth LLC boosted its holdings in Microsoft by 287.0% in the fourth quarter. Fairway Wealth LLC now owns 89 shares of the software giant's stock worth $43,000 after purchasing an additional 66 shares during the period. Institutional investors and hedge funds own 71.13% of the company's stock.

Key Microsoft News

Here are the key news stories impacting Microsoft this week:

• Positive Sentiment: Azure growth exceeded expectations. Azure revenue increased 43% year over year, above the roughly 40% analyst forecast, and annual Azure revenue surpassed $100 billion for the first time. Intelligent Cloud revenue rose 32% to $39.3 billion, strengthening confidence in Microsoft’s cloud and AI strategy. Microsoft tops quarterly cloud growth estimates
• Positive Sentiment: Microsoft delivered a broad earnings beat. Fiscal Q4 revenue reached $90.01 billion versus an $87.62 billion consensus estimate, while adjusted earnings per share came in at $4.74 versus $4.24 expected. Revenue grew 17.7% year over year and net income rose about 31%. Microsoft Q4 earnings beat estimates
• Positive Sentiment: AI monetization is gaining traction. Microsoft 365 Copilot surpassed 30 million paid users, up from 20 million in April. Management also cited strong AI demand, a large customer backlog and a first-quarter fiscal 2027 revenue outlook of $89.9 billion to $91.0 billion, slightly above consensus. Analysts responded with multiple buy-rating reiterations and higher price targets. Microsoft shares set for best day in nearly 18 years
• Neutral Sentiment: Capital spending remains elevated but appears more manageable. Microsoft’s projected 2026 capital expenditures declined to approximately $175 billion from $190 billion, largely because of an accounting adjustment rather than a major reduction in AI investment. The company said GPU spending can be slowed if demand weakens, while extending data-center lifespans may improve returns. Microsoft’s capex forecast
• Negative Sentiment: Regulatory and legal overhangs persist. The U.K. competition regulator is investigating whether Microsoft misled customers about Microsoft 365 subscription options, while several law firms publicized securities-fraud lawsuits related to alleged Copilot disclosures. UK investigation into Microsoft 365 subscriptions
• Negative Sentiment: Cloud-security and competitive risks remain. Cybersecurity firm Wiz reported a flaw that could potentially have exposed Microsoft cloud customers, and Nvidia’s proposed financing backstop for OpenAI highlights uncertainty around AI infrastructure financing and Microsoft’s relationship with competing AI platforms. Wiz report on Microsoft cloud flaw

Microsoft Company Profile

Microsoft Corporation is a global technology company headquartered in Redmond, Washington. Founded in 1975 by Bill Gates and Paul Allen, Microsoft develops, licenses and supports a broad range of software products, services and devices for consumers, enterprises and governments worldwide. Its operations span personal computing, productivity software, cloud infrastructure, enterprise applications, developer tools and gaming.

Microsoft's product portfolio includes the Windows operating system and the Microsoft 365 suite of productivity and collaboration tools (Office apps, Outlook, Teams).

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