Microsoft is set to release its fiscal Q2 2026 earnings report on Jan. 28. Morningstar highlights the importance of AI data points and Azure performance. Rumors of headcount reduction and Azure sales targets are circulating. Despite recent stock decline, Morningstar views Microsoft as well-positioned in AI and public cloud sectors, predicting meaningful upside.

Morningstar believes Microsoft stock is moderately undervalued with a fair value estimate of $600 per share. Revenue growth is expected to increase, driven by Azure, Office 365, Dynamics 365, LinkedIn, and AI adoption. Microsoft’s economic moat is wide, supported by switching costs, network effects, and cost advantages.

Microsoft enjoys excellent financial strength with $51 billion in net cash as of June 2025. Revenue growth is predicted to be driven by Azure adoption and digital transformation initiatives. The company faces medium uncertainty due to risks in various product segments and competition in the technology landscape.

Bulls see Microsoft benefiting from the shift to public cloud, strong performance of Microsoft 365, and monopoly-like positions in key areas. Bears point out slowing momentum in subscriptions, lack of mobile presence, and not being the top player in key growth sources like Azure and Dynamics.

Read more at Morningstar: Ahead of Earnings, Is Microsoft Stock a Buy, a Sell, or Fairly Valued?