Goldman Sachs believes that fears around AI disruption and slower-than-expected Azure growth are overstated and the recent pullback has created a buying opportunity for Microsoft shares. The bank stood by its buy rating on the "Magnificent Seven" stock and its 12-month price target of $600. Goldman's forecast implies that the tech titan could rise more than 49%. Microsoft has plunged 17% since the start of 2026, suffering in the broader pullback away from technology stocks as fears of artificial intelligence disruption have intensified. Shares had tumbled 10% after the company reported its most recent earnings, with investors unimpressed by 39% revenue growth at Azure and its other cloud services. The pace of growth was lower than the 40% it achieved in the fiscal first quarter and was slightly below the 39.4% StreetAccount consensus analyst forecast. MSFT YTD mountain MSFT YTD chart Goldman Sachs analyst Gabriela Borges wrote that Microsoft has in total stumbled 15% since its earnings report, in part due to upward revisions to its capital expenditures guidance without upward revisions to Azure. This, she wrote, resurfaced questions about Microsoft's return on investments and Azure's competitive positioning relative to its peers. The analyst added that Azure growth in any given quarter is largely a function of how much new compute capacity comes online and how Microsoft allocates that capacity between internal use cases and external customers. At present, Microsoft remains supply constrained, with incremental capacity increasingly directed towards internal users such as Copilot and R & D, rather than revenue-generating external workloads. As a result, Borges said that some of Microsoft's compute investments are not yet flowing through to reported Azure revenue, thereby contributing to near-term concerns around monetization. She assuaged investors' fears by stating that the lack of upward revisions to Azure was simply a byproduct of Microsoft choosing to prioritize its internal and less visible initiatives. "We find the analogy of an iceberg useful: there is a portion of compute capex that is 'above the surface' i.e. directly monetized and visible in Azure numbers and Office 365 every quarter. The remaining compute is 'below the surface' i.e. not directly monetized today but may be monetized in the future and highly strategic to Microsoft's broader priorities," she wrote. "Microsoft has stated that if it had instead allocated incremental capacity to Azure, Azure growth in 2QFY would be over 40% vs. 38% in cc (we estimate low 40s)."
