Analysts say Microsoft stock is deeply undervalued ahead of Q4 earnings

Microsoft Corp. MSFT shares are trading lower Wednesday as analysts argue the tech giant’s prolonged underperformance has pushed the stock into deeply oversold territory ahead of its fourth-quarter earnings report. Here’s what you need to know.

• Microsoft stock is showing weakness. Why are MSFT shares declining?

Three Analysts Argue the Selloff Has Gone Too Far

Truist Securities analyst Terry Tillman kicked off the conversation by reiterating a Buy rating and a $575 price target, contending that the scale of pessimism surrounding the stock has become disconnected from the underlying business reality. Microsoft has shed roughly 18% so far this year, a trajectory that puts it behind every other member of the Magnificent Seven and well below the Nasdaq’s 10% gain and the S&P 500’s 9% advance over the same stretch.

Tillman’s view is that a combination of constructive fourth-quarter results and a credible forward outlook could begin reversing that narrative.

Oppenheimer Sees Earnings as a Chance to Reassert AI and Microsoft 365 Strength

Oppenheimer’s Brian Schwartz held his Outperform rating and $515 price target, framing the upcoming earnings release as an opportunity for the company to demonstrate that demand remains healthy and that its AI business is delivering durable revenue growth alongside stable Microsoft 365 results. Schwartz acknowledged that investor expectations have been tempered by IBM’s negative preannouncement and a broader compression in valuation multiples, which he believes sets a lower bar for Microsoft to clear.

That said, he flagged persistent concerns around capital expenditure growth and returns, competitive pressure in AI and a perception among some investors that management is playing catch-up rather than setting the pace in the AI race as issues unlikely to be resolved by a single earnings report.

Bernstein Sees Limited Downside but Says True Inflection May Take Time

Bernstein’s Mark Moerdler offered perhaps the most measured take, describing Microsoft as a high-quality business with limited downside while stopping short of predicting that next week’s results will serve as a definitive inflection point, MarketWatch reported. His $646 price target implies roughly 62% upside from recent levels, and he believes a breakout is coming in the quarters ahead even if the precise timing remains uncertain.

Moerdler identified two conditions the company needs to satisfy to earn a higher valuation multiple from the market: a convincing demonstration that Azure revenue growth justifies the scale of ongoing investment and evidence that Azure’s gross margins are stabilizing after a period of pressure from both CPU and GPU capacity constraints as well as elevated memory costs.

Capex Remains the Central Fault Line

All three analysts converged on capital expenditure as the debate that overshadows everything else heading into the print. Microsoft disclosed total calendar year 2026 capex of $190 billion last quarter, representing a 61% increase from the prior year.

Truist is now modeling $252 billion in fiscal 2027 capex, a figure that sits above the Street’s $233 billion consensus and suggests analyst estimates are still in the process of catching up to what the company’s ambitions actually require. Tillman framed the core question not as whether spending will remain high but whether the rate of growth can begin to decelerate from its current pace while the company maintains the free cash flow generation that has historically been one of its defining financial strengths.

MSFT Shares Are Dipping

MSFT Price Action: Microsoft shares were down 2.29% at $388.66 at the time of publication on Wednesday, according to Benzinga Pro.

Image: FellowNeko/Shutterstock

© 2026 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

This article Analysts Say Microsoft Stock is Deeply Undervalued Ahead of Q4 Earnings originally appeared on Benzinga.com.