Microsoft Corp. (MSFT.O): Expecting Copilot Strength in Q4; Higher Capex in FY27 But With a Pathway to Better Returns

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Microsoft Corp. (MSFT.O): Expecting Copilot Strength in Q4; Higher Capex in FY27 But With a Pathway to Better Returns

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15 Jul 2026 05:44:43 ET │ 22 pages

Microsoft Corp. (MSFT.O)

Expecting Copilot Strength in Q4; Higher Capex in FY27 But With a

Pathway to Better Returns

CITI'S TAKE

We remain positive on MSFT with positive checks particularly on CoPilot, Buy

and view the company increasingly strategically positioned in an era of

optimizing token spend and AI efficiency. Overall we expect a strong Q4. As Price (14 Jul 26 16:00) US$384.93

we look to Q1/FY27, investors will need to digest higher capex intensity and Target price US$570.00↓

likely conservative initial FY27 op margin guidance. We think MSFT will be

from US$620.00able to demonstrate stronger returns with accelerating growth rates in

flagship franchises (Azure + M365 CoPilot) as we move into FY27, which Expected share price 48.1%would ultimately drive accelerating overall revenue/EPS growth through return

FY30. We raise our CoPilot estimates, while moderating Gaming along with Expected dividend yield 0.9%several other estimate adjustments detailed in the note. Our TP moves to

$570 (based on 25x FY28 EPS discounted back). Expected total return 49.0%

Market Cap US$2,859,427M

Post-Q Checks Summaries; CoPilot + AI Mindshare Strength — Our reseller survey

featured a smaller sample size this quarter but still showed solid growth and quota

achievement trends though did modestly downtick QoQ. See deck. Partner checks

indicated M365 Copilot as a key growth driver with steady Azure momentum. Our Price Performance

CIO Survey was positive as MSFT remains a key AI beneficiary. (RIC: MSFT.O, BB: MSFT US)

Expecting Upside to Copilot in FQ4 —We expect a similar modest Azure beat (~1pt),