This article first appeared on GuruFocus.
Microsoft Corporation (MSFT, Financials) shares declined 2% after a downgrade from Stifel, which warned that the company’s aggressive artificial intelligence spending and cloud capacity issues could weigh on margins and earnings growth.
Analyst Brad Reback reduced his rating to Hold and lowered the price target to $392 from $540, saying current consensus estimates for fiscal 2027 appear too optimistic. He expects Microsoft’s 2027 capital expenditures to reach about $200 billion, matching Alphabet Inc.’s projected 2026 range, and forecasts a decline in gross margins to 63% from a previous view of 67%.
Reback noted ongoing supply challenges in Azure and increasing competition from Alphabet Inc.’s Gemini platform and Anthropic PBC. Despite the short-term caution, he acknowledged that Microsoft remains well-positioned to benefit from long term AI adoption trends.
Microsoft’s stock fell down 2% in premarket trade to about $406, which shows that investors are worried about possible earnings pressure in the near future.
