Microsoft price target lowered on M365, Copilot questions

UBS analysts maintained a ‘Buy’ standing connected Microsoft Corp (NASDAQ:MSFT), portion lowering their 12-month terms people to $510 from $600, citing capitalist scrutiny connected Microsoft’s M365 and Copilot offerings and broader AI competition.

The steadfast noted the banal trades astatine 19 times projected 2026 non-GAAP earnings, trading hands astatine $370 connected Wednesday afternoon.

“At 19x calendar twelvemonth 2026 non-GAAP EPS we stay ‘Buy’-rated, but admit that the communicative astir M365/Copilot needs to amended successful bid for the banal to truly re-rate higher,” UBS analysts wrote.

Investor meetings crossed Asia and Australia highlighted questions astir the maturation and durability of Microsoft’s halfway M365/Copilot business, they noted.

Microsoft pointed to accrued Copilot usage successful the 2nd 4th and caller initiatives including a caller E7 bundle, Copilot Cowork, and enactment changes. UBS said these moves “signal a much assertive stance and consciousness of urgency wrong Microsoft.”

On the unreality front, Microsoft expressed assurance successful Azure demand, with UBS noting, “Microsoft sounded precise bullish astir Azure demand, including halfway CPU-based request that serves arsenic a bully work to the likes of Snowflake and Datadog.”

However, the institution did not supply guidance beyond the March quarter, and UBS expects GPU premix shifts could proceed to measurement connected Azure growth. Capital expenditures are projected to emergence successful fiscal 2027, perchance expanding astir 25% from an estimated $145 cardinal successful fiscal 2026.

Valuation metrics stay elevated, with Microsoft trading astatine 44 times projected escaped currency flow, 21 times GAAP earnings, and 19 times non-GAAP net for 2026.

UBS wrote that portion the banal appears reasonably priced, “it whitethorn instrumentality clip for sentiment astir M365/Copilot to bend.”