Microsoft Stock Surges 39% With Strong Growth Forecasts

Microsoft's stock has surged nearly 39% since June 30, closing at $517.53 as of October 2. This follows a 22.9% decline in the first half of the year and a 37.5% rebound in the September quarter. Analysts have raised their consensus revenue estimates for fiscal 2030 to around $657 billion, up about 8%, while the mean target price increased 3% to around $578. However, the stock's rapid rise has reduced the premium of the target price to just 13%.

The company's fiscal Q4 2026 report highlighted significant growth in commercial remaining performance obligation (RPO), which grew 84% year over year to $678 billion, largely driven by OpenAI. However, CFO Amy Hood noted that sequential RPO growth was entirely from customers outside of frontier model companies. The portion recognized beyond the next 12 months grew 112% year over year, while the next 12 months saw a 37% increase.

Microsoft is also focusing on improving margins through its own chips and models. The Maia 200 chip delivers 30% better performance per dollar, and in-house models have cut GPU costs significantly. Despite these efforts, consensus forecasts predict a slide in gross margin from 67.94% in fiscal 2026 to around 61% by fiscal 2031. Management expects the operating margin to be down less than 1 point in fiscal 2027.

The TIKR model projects a mid-case target price of around $1,145 by June 30, 2031, representing a potential total return of 121%. This target is about 28 times the consensus fiscal 2031 EPS of around $41. The primary risk identified is overbuilding, with CEO Satya Nadella cautioning about running an efficient operation. Wells Fargo raised its target to $725, about 25% above the Street mean.