Microsoft (NASDAQ:MSFT) popped off a stellar FY 2026 Q1 earnings report last week, demonstrating once again why it’s situated so firmly among the top echelon of U.S. companies.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
Its revenues of $77.7 billion were up 18% year-over-year, while operating income increased by 24% to reach $38 billion. The company’s huge capex spending of $34.9 billion did jump by 74% year-over-year, however, which seemed to contribute to the dampening sentiment in the days that followed.
Microsoft’s share price has lost about 5% since the earnings call, though MSFT is up by some 23% for the year. This is in the vicinity of the NASDAQ Composite, and thus remains a far cry from some of the earth-shattering returns of some of the other tech stocks.
Can investors expect Microsoft’s performance to generally mirror the market going forward? Top investor John Ballard isn’t quite ready to accept this fate for MSFT.
“Microsoft stock still has potential for market-beating returns despite its large market cap,” predicts the 5-star investor, who is among the top 2% of stock pros covered by TipRanks.
The investor is laser-focused on the company’s cloud revenue of $49.1 billion in Q1, which enjoyed a 26% year-over-year increase. Ballard notes that this represented some 63% of the company’s total business.
And more growth seems to be around the corner. Ballard points out that the demand for data centers is outpacing Microsoft’s capacity, meaning that the company “left some revenue on the table.”
In fact, Microsoft’s surging commercial remaining performance obligations of $392 billion, up 51% year-over-year, are a concrete display of a hungry market’s desire for more compute power.
“Microsoft’s cloud business could see accelerating growth as it adds more data center capacity, which is fuel for the stock in 2026,” adds Ballard.
In other words, it’s not too late to jump on the Microsoft bandwagon, as the cloud business could propel MSFT onward and upward in the years ahead.
“Microsoft is one of the top cloud service providers, putting it in a solid position to capitalize on growing demand for AI and reward shareholders over the next decade,” sums up Ballard. (To watch John Ballard’s track record, click here)
You won’t find much disagreement on Wall Street. With 32 Buys, and not a single Hold or Sell, MSFT coasts to a Strong Buy consensus rating. Its 12-month average price target of $634.87 implies an upside of ~23%. (See MSFT stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.