Microsoft Corp (NASDAQ:MSFT) will report its fiscal fourth quarter earnings next week and Bank of America analysts are optimistic that the company will deliver solid results and potentially a modest revenue beat as momentum continues to build in its cloud and AI-driven segments.
The analysts raised their price objective on Microsoft ahead of the report to $585 from $515. The stock traded hands at $513 on Wednesday, up 22% in the year to date.
For the June quarter, Wall Street expects Microsoft to report revenue in the range of $73.7 billion to $74.1 billion, implying growth of 13% to 14%.
The Street consensus for earnings per share (EPS) is $3.35, reflecting a 13.5% year-over-year increase.
“Commentary suggests largely in line Q4 fiscal year 2025 deal activity, consistent with Q3,” the bank’s analysts wrote.
They noted strength in Azure could lead to upside of up to 1% above their Q4 revenue estimate of $73.7 billion, implying growth of 13.9%.
The firm also highlighted strong performance in security and data analytics as key tailwinds for Azure.
“Azure strength was driven by steady cloud migrations and strength in security and data analytics,” BofA wrote, adding it sees the potential for Azure to grow 35.5% year-over-year in constant currency, with 18 percentage points driven by AI, slightly above its base case of 34.2%.
Microsoft’s productivity and business processes segment could also surprise to the upside, driven by accelerating Copilot adoption and continued demand for Office upgrades, the analysts added.
“We see potential for 13% constant currency growth versus our base case of 12.5%, driven by upside from commercial Office growth of 15%, versus guidance for 14%,” BofA wrote. “Partner feedback suggests stable E3/E5 upgrade activity and ramping Copilot adoption.”
On the PC side, Microsoft could benefit from better-than-expected market conditions. For More Personal Computing, the bank sees potential for 3.4% constant currency growth, compared to its prior estimate of 2.4%, supported by “better-than-expected preliminary Q2 PC shipment growth of 7% year-over-year versus 4% expected.”
Looking ahead to fiscal 2026, the analysts expect Microsoft’s revenue growth to hold steady at 14% fueled by continued Azure expansion.
Despite the stock’s 30% gain since Q3 and its current premium valuation, BofA believes investor sentiment is well supported by Microsoft’s long-term positioning.
“With Azure growing mid-30s in a still tough macro, capex flattening as a % of revenue and margin expansion, we see sentiment and the multiple holding,” the analysts wrote.
The bank sees the next leg of upside coming from Microsoft's AI initiatives: “The next catalyst is likely more evidence that Copilot is becoming more material to growth,” the firm wrote. “We believe Copilot has potential to drive incremental growth as we move through fiscal year 2026. Reiterate ‘Buy’ on our top pick.”
Microsoft will hand down its Q4 report after US markets close.
- Updated with share price movement -