The game behind the "outperforming the market" rating for Microsoft Corporation (MSFT.US): strong momentum in cloud and AI, but the market is starting to discount the risk of "disruptive" factors.

Microsoft Corporation (MSFT.US) is considered one of the best long-term tech stocks by analysts. Recently, Mizuho Securities lowered its target price for Microsoft Corporation stock from $640 to $620, but maintained an "outperform" rating. Citigroup also lowered its target price, but still maintained a "buy" rating. It is worth noting that this adjustment was made by Mizuho as part of their preview of the fourth quarter performance for large software stocks in the 2025 fiscal year. Analysts at the firm pointed out that channel research remains strong overall, public cloud data remains steady, and the adoption of Artificial Intelligence (AI) is very strong. Despite the positive fundamentals, the firm added that investor concerns about the disruptive impact of AI are increasing and starting to affect the valuation multiples of software companies. Mizuho stated that the industry is experiencing multiple valuation compressions, which is the main reason for their target price downgrade. On the other hand, Citigroup also lowered its target price for Microsoft Corporation from $690 to $660 on January 21, while maintaining a "buy" rating. Citigroup analysts said that their distributor surveys and partner checks show a more complex market environment ahead of Microsoft Corporation's second quarter performance release in the 2026 fiscal year. The firm expects the performance of Azure cloud services in the second quarter to exceed expectations, but due to a forecasted weakness in the personal computer (PC) market, performance estimates for Microsoft Corporation's non-Azure businesses have been lowered.