Bank of America said it expects Microsoft Corp (NASDAQ:MSFT) to post slightly better-than-expected fiscal first-quarter results, citing strong demand for cloud and security products and growing investments in artificial intelligence infrastructure.
Ahead of Microsoft’s quarterly report on October 28, the bank said checks with channel partners indicate deal activity “remains healthy with inline or better results,” suggesting potential revenue upside of 0% to 1% versus its $77 billion forecast, up 18% from a year earlier.
The analysts cited workload migration to Azure, along with robust demand for security and application products, as key growth drivers.
Azure revenue is expected to grow about 39% year-over-year, slightly above Bank of America’s base case, despite some softness in other workloads linked to capacity constraints and longer enterprise planning cycles for AI integration.
“These dynamics are positive longer term as customers embed Microsoft more deeply within the enterprise,” the analysts wrote, adding they see upside in Microsoft’s productivity and business processes segment, supported by steady demand for Office E3 and E5 subscriptions.
Bank of America highlighted capital expenditure trends as a potential catalyst for the stock, noting Microsoft’s “strategic and measured approach” to AI infrastructure expansion and growing visibility into compute investments. The bank expects capital spending to rise above consensus estimates of $115 billion for fiscal 2026 to about $125 billion, or 38% of revenue.
While Microsoft shares have underperformed since its last quarterly report, Bank of America said upward revisions to capital spending and margins, as well as accelerating growth in commercial Office products, could lift sentiment.
The brokerage has a “Buy” rating and $640 price objective on the stock, calling Microsoft a top pick and an “AI leader in both applications and infrastructure.”
Shares of Microsoft traded hands at $538 on Wednesday afternoon ahead of its earnings report.
- Updated with share price movement -