Evercore ISI Lowers Microsoft Price Target to $510

Evercore ISI analyst Kirk Materne lowered the price target on Microsoft (NASDAQ: MSFT) to $510.00 (from $580.00) while maintaining an Outperform rating.

“Microsoft delivered solid F3Q results with total revenue of $82.9bn coming in ahead of Street expectations ($81.4bn) and EPS of $4.27 also outperforming ($4.05).

Azure accelerated by 100bps to ~39% y/y growth in c/c vs. expectations in the ~38% range and importantly, the F4Q guidance implies acceleration to 39-40% despite a 4% tougher compare.

Microsoft also called for Azure to accelerate further in 2H CY26 and for total revenue and operating income to grow in the double digits again in FY27.

It’s also worth calling out that Microsoft is seeing some material inflection in Copilot usage with over 20 million paid M365 Copilot seats (+250% y/y), usage up ~6x YTD, and queries per user increasing ~20% q/q.

All in, AI ARR is now at $37bn, up 123% y/y and up from $13bn in 2Q25.

The rub (and why shares are flat) is that capex growth is also exploding higher as Microsoft races to build out infrastructure to keep up with demand.

The company now expects CY26 capex of ~$190bn vs. our expectation of ~$163bn, with about $25bn of the upside related to higher component pricing.

While MSFT doesn’t get a free pass on the higher component pricing, we believe the higher capex speaks to the ongoing demand for its AI/cloud offerings.

Bottom line: We believe the forecasted acceleration in Azure and some encouraging trends around Copilot support the increasing capex spend though it could limit upside in the near-term.

Given the higher level of capex, we are adjusting our PT to $510 or 25x CY27 EPS.”

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