Stifel Cuts Microsoft Target to $400, Sees 450bp FY27 Margin Hit
SF•Stifel’s Brad Reback cut Microsoft’s price target to $400 from $415 and issued its first Hold rating since March. The firm forecasts fiscal 2027 gross margins will compress about 450 basis points to 63%, more than 300 basis points below consensus, and sees EPS roughly $1 above estimates.
1. Price Target Revision
Stifel analyst Brad Reback cut Microsoft's price target from $415 to $400 and assigned a Hold rating, marking the first time since March the stock has been rated Hold at the firm.
2. Gross Margin Forecast
The firm projects fiscal 2027 gross margins compressing roughly 450 basis points to about 63%, more than 300 basis points below the 66.5% consensus estimate.
3. Azure Growth and Capex Impact
Stifel highlights that Azure’s rapid growth, roughly three times the rest of the business, combined with elevated capital spending, is driving margin pressure quarter-over-quarter through fiscal 2027.
4. Earnings Per Share Outlook
With operating expenses guided higher and growing finance lease obligations, Stifel expects Street fiscal 2027 EPS forecasts of $19.45 to be about $1.00 too optimistic.
