Goldman Sachs Raises Microsoft Price Target to $640

Goldman Sachs analyst Gabriela Borges raised the price target on Microsoft (NASDAQ: MSFT) to $640 (from $610) while maintaining a Buy rating.

“Microsoft is indicated +7% after hours post a solid 4QFY (June) report.

4Q revenue of $90.0bn (+17% cc yoy) was 3% above the Street and non-GAAP EPS of $4.74 (+23% yoy) was 11% above the Street; and we detail key pieces to guidance below (FactSet).

We view this quarter as a meaningful step in reversing the stock’s multi-quarter period of underperformance, as Microsoft delivered tangible proof points across several key investor debates: Azure acceleration against ongoing capacity constraints and 1P mix allocation, improving AI unit economics with stable cloud margins, and increasing evidence of Copilot monetization.

We believe the impact of higher inflation costs on capex are well understood (~14% impact to CY26 capex).

However, internal margin targets do not change even when component pricing is higher.

Microsoft provided several datapoints on better monetization of Azure that we think are key in stabilizing ROI on a higher cost base, including a) nearly 50% faster dock to live times for GPUs, and b) ongoing scaling and block and tackle on cost, c) thoughtful bundling and pricing, including on Github power users, PaaS and CPU-related services.

We look to whether improvements in pricing, internal silicon and model diversification can drive a further step function change in margins in FY27.

The center of gravity in the enterprise is shifting away from frontier models to frontier ecosystems.

Our industry conversations intraquarter have illustrated the importance of enterprises adopting a model strategy where not every token is used equally, and there is more discernment between the types of requests that get routed between frontier, open source models, and SLMs.

At the same time, Microsoft has scaled its Frontier program (for forward deployed engineers) and its model routing to drive context-based model outcomes and token efficiencies for customers.

We view Microsoft’s role in the AI ecosystem as increasingly strategic in the context of evolving customer model strategy.”

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