Microsoft (MSFT) Stock Is Down 20% — Goldman Says Now Is the Time to Buy

TLDR

• Goldman Sachs analyst Gabriela Borges has a Buy rating on MSFT with a $610 price target, implying 58% upside
• MSFT is down 20% year-to-date ahead of its July 29 fiscal Q4 earnings report
• Azure growth is expected to hit 40-41% in constant currency, slightly above Microsoft’s own guidance
• Goldman raised FY28-FY30 capex estimates by ~10%, putting FY28 spending at $319 billion
• Copilot adoption and monetization remain key concerns investors will watch closely

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Microsoft heads into its July 29 earnings report with its stock down exactly 20% for the year. That’s a rough first half, and investors are hoping the fiscal Q4 results give them something to work with.

Goldman Sachs analyst Gabriela Borges says the setup going into the print is actually “quite appealing.” She believes investor expectations are low, which could make it easier for Microsoft to surprise on the upside.

MSFT is currently trading around $385, well below Goldman’s $610 price target.

Microsoft Corporation, MSFT

Borges identifies three things investors will be watching closely. First, whether Azure growth is accelerating fast enough to justify the massive capex being poured in. Second, Microsoft’s heavier reliance on Nvidia GPUs compared to peers who have developed more in-house chip capabilities. Third, whether new AI-powered tools like Claude Cowork could eat into Office 365’s market position, especially as questions linger around Copilot’s performance.

Azure Growth in Focus

On Azure specifically, Borges expects Q4 growth to come in at 40-41% in constant currency. That’s slightly above Microsoft’s own guidance range of 39-40%. For Q1, she sees guidance of 40-41%, roughly in line with Street expectations, with a chance Microsoft could guide “slightly above.”

Azure’s growth has been supply-constrained, but Borges expects that to ease as more capacity comes online. She sees this as one of the key catalysts for the stock to start outperforming.

Goldman also raised its capex estimates for FY28-FY30 by around 10%. The new FY28 figure sits at $319 billion including financial leases, well above both her previous estimate of $287 billion and the Street consensus of $252 billion.

Copilot Still a Question Mark

Copilot remains the elephant in the room. Borges says a “sustainable M365 acceleration will likely take time,” but she does expect some positive datapoints in the near term — continued seat growth, more AI-related revenue, and updates on the broader frontier AI model ecosystem.

For the stock to truly turn around, Borges says Microsoft needs to show three things: Azure outperforming expectations, clearer visibility into chip supply including Maia and AMD as a secondary supplier, and stronger evidence that Copilot is actually making money.

The broader backdrop isn’t easy. Big Tech is in the middle of a massive AI spending wave. Alphabet is expected to report Q2 capex of $44.9 billion — a 100% jump year-over-year. Amazon’s estimated cumulative spend from 2026 to 2028 now sits at $827 billion according to Goldman’s Eric Sheridan.

Memory costs are rising too. Micron is raising prices in Q3, adding more pressure on hyperscalers building out data centers.

Beyond Goldman, the Street remains firmly positive on MSFT. The stock holds 34 Buy ratings and just 1 Hold, giving it a Strong Buy consensus. The average price target is $560.42, pointing to 12-month upside of around 45.5%.