Cantor Fitzgerald Reiterates Overweight on Microsoft, $502 Price Target

Cantor Fitzgerald analyst Thomas Blakey reiterated an Overweight rating and $502.00 price target on Microsoft (NASDAQ: MSFT).

“Microsoft reported a strong F3Q26 with upside driven by M365 and Copilot, with a clear inflection in AI momentum in the model.

Azure growth posted a 1.5pt beat versus midpoint of guide on a cc basis, and guide implies a slight acceleration, with the high end of guide touching the coveted 40% level that many investors we have spoken to were looking for despite Microsoft continuing to be capacity-constrained as well as allocating GPU-based compute across use cases internally (i.e., away from Azure).

Resulting FCF in F3Q26 was much stronger than expected, with topline beat and continued cost efficiencies. GM% was guided below consensus forecasts due to a mix shift to AI/Azure as well as better-than-expected usage of Copilot services across the platform, particularly GitHub Copilot, with management implementing hybrid pricing fixes that will better price to value on a per-seat basis, as well as focus on usage-based pricing where needed.

As previewed, ongoing capacity constraints combined with related component shortages (i.e., memory) in addition to increased usage of Copilot services are leading to an uptick in capex versus expectations, which calls from a meaningful uptick in capex 2HC26 vs.

1HC26.

Our topline forecasts for F27 move higher driven by Azure, offsetting lower GM% forecast (-140bps from prior est) and FCF moves meaningfully lower given an uptick in capex in 2HC26 (1HF27), sustaining relatively in 2HF27, leading to a possible shift in ‘goal post’ focus to NT FCF pressures instead of copilot strength and Azure reaching ~40% growth.

We view F3Q26 as a validation.

Microsoft is a beneficiary of secular AI growth trends with Azure nearing $170b run rate business growing near 40% in F4Q26 and Copilot inflecting sharply higher with NT investments, including capacity constraints, leading to LT sustainable profitable growth informing our OW rating on MSFT shares reit our $502 PT.”

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