Microsoft Crushed Earnings... It’s Not Too Late to Buy - 5/3

There’s Still Time to Jump into Microsoft

Microsoft (SYM: MSFT) just reminded Wall Street why it remains one of the most dominant—and dependable—names in tech. Following a blowout fiscal Q3 earnings report, shares exploded higher last week, and analysts scrambled to revise their price targets and outlooks.

But here’s the good news: despite the surge, the stock still offers compelling upside.

Crushing Expectations

Microsoft reported adjusted earnings per share of $3.46 on revenue of $70.1 billion, easily surpassing consensus expectations. Analysts were only looking for $3.22 EPS on $68.4 billion in revenue.

For context, the company earned $2.94 per share on $61.9 billion in revenue a year ago. That’s a year-over-year EPS growth of nearly 18% and top-line growth of over 13%. This kind of performance doesn’t just happen by accident—it speaks to Microsoft’s strength across its core businesses and its leadership in high-growth segments like cloud and AI.

The Cloud and AI Engines Are Roaring

One of the biggest drivers of this quarter’s success was cloud computing. Microsoft's cloud revenue surged 20% year-over-year to $42.4 billion. The standout performer here was Azure, its public cloud platform, which grew an impressive 33% year-over-year.

But there’s more beneath the surface.

Microsoft's integration of artificial intelligence (AI) services into Azure is showing real momentum. According to JPMorgan, AI services added 16 percentage points of growth to Azure in Q3 alone—up from 13 points in Q2 and 12 in Q1. That acceleration underscores the growing demand for AI infrastructure and the effectiveness of Microsoft’s strategy.

Microsoft’s ability to bring AI-related capacity online faster than expected was a key surprise this quarter, giving it an edge over competitors and signaling that it can meet skyrocketing demand from enterprise clients.

Looking Ahead: More Momentum in Q4

And the company doesn’t expect the party to stop.

Microsoft’s forward guidance is bullish, with management pointing to strong ongoing demand for AI services and cloud capacity. With organizations across industries racing to adopt generative AI and build more advanced digital workflows, Microsoft is in a prime position to capture this secular trend.

In fact, management highlighted that capacity constraints in its data centers are a limiting factor right now—not demand. That’s a good problem to have, especially as new infrastructure comes online in the second half of the year.

Wall Street Analysts Turn Bullish—Even the Skeptics

The strong quarter caught some analysts off guard—particularly those who had taken a more cautious stance recently.

KeyBanc, for example, had downgraded Microsoft just two weeks before earnings. After the results, they were quick to acknowledge the miss. “Our downgrade looks pretty foolish right now. No need to hide from it,” the analyst admitted to Barron’s. “While we said it wasn’t a quarter-calling move, the fact is we downgraded two weeks ago and the company subsequently put up one of its best quarters in recent memory.”

Meanwhile, bulls are doubling down.

JPMorgan reiterated its overweight rating with a $475 price target, citing the rapid growth of Azure’s AI services and Microsoft's ability to deliver strong returns on capital expenditure.

Bank of America also maintained a buy rating with a higher $515 price target, noting that the company’s Q3 results “suggest that ROI on capex is coming into view sooner than expected.” They also pointed out that core Azure growth is accelerating, thanks to both market share gains and AI tailwinds.

Wedbush echoed that sentiment with its own $515 target, saying it remains “laser focused on the AI piece of this MSFT story.” The firm believes that Microsoft continues to sit “in the driver's seat in this AI Revolution,” with metrics consistently beating expectations.

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What’s Next? Price Targets and a Possible Stock Split

From its last traded price of $428.58, Microsoft would only need to climb about 8.5% to retest the $465 level—a reasonable near-term target based on both technical momentum and fundamental strength.

But if the bullish calls from Wedbush and Bank of America are correct, shares could eventually surge toward the $500–$515 range over the next few quarters. That would represent roughly 20% upside from current levels.

And here's another intriguing possibility: a stock split.

While Microsoft hasn’t made any official announcements, a split wouldn’t be surprising. The stock is approaching all-time highs and a psychological threshold near $500. Splits are often used to improve accessibility for retail investors and renew excitement. The last time Microsoft split its shares was in 2003—when they were trading in the low $50s. A split in today’s market could bring in a fresh wave of buyers.

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Written by Ian Cooper

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