Deutsche Bank Maintains ‘Buy’ Rating on Microsoft Despite Price Target Reduction to $575
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Despite slightly disappointing cloud growth,Deutsche Bank reaffirmed its “buy” rating for Microsoft (NASDAQ: MSFT) on January 29,2026,while lowering its price target from $630 to $575. The analysis signals continued confidence in the tech giant’s long-term prospects, even as market expectations for its Azure cloud platform remain high.
Microsoft’s stock closed friday on the NASDAQ at $430.29, down 0.7%.This backdrop sets the stage for Deutsche Bank’s revised assessment: a tempered price target coupled with a sustained positive outlook. The firm’s analysis highlights the delicate balance between delivering solid results and exceeding the increasingly ambitious expectations of the market.
Azure Growth Falls Slightly Short
the adjustment to the price target stems from Azure’s growth, which, while robust, didn’t quite meet elevated market forecasts. According to one analyst,the results were “solid” but insufficient to fully satisfy “higher market expectations.” Specifically, Azure experienced 38% year-over-year growth on a currency-adjusted basis, falling slightly below the anticipated 39%. This nuance prompted the price target revision, though the “buy” rating was upheld.
Prioritizing AI and High-Margin Opportunities
A key insight from Deutsche Bank’s analysis centers on microsoft’s strategic allocation of GPU capacity. The company is reportedly prioritizing the use of these resources for its own artificial intelligence applications and research and development, rather than maximizing capacity available through Azure. This decision reflects a broader strategy of focusing on “higher-margin, recurring software business opportunities,” as one analyst explained. Microsoft, it appears, is optimizing not just for growth, but for the quality of that growth.
Bullish and Bearish Perspectives
Deutsche Bank’s assessment outlines both positive and negative factors influencing Microsoft’s outlook:
Positive Factors:– Azure growth remains strong, projected at 37-38% next quarter. Microsoft prioritizes AI, potentially boosting revenue. The $575 target still suggests significant upside.
Negative Factors:– Azure growth missed high market expectations. Cloud performance must consistently exceed forecasts to drive stock momentum.
Balancing Valuation and Outlook
The simultaneous reduction in the price target and confirmation of the “buy” rating may seem contradictory, but it reflects Deutsche Bank’s revised valuation model. According to the firm, the adjustment is based on “updated estimates and thinking about the business and the market.” This signifies a recalibration of expectations rather than a diminished view of Microsoft’s overall quality. The “buy” rating remains in place because the firm believes the new price target more realistically reflects the company’s potential.
A Realistic Assessment of a Tech Giant
This Microsoft stock analysis isn’t characterized by hype, but rather by a pragmatic reality check. deutsche Bank, through the insights of Brad Zelnick, delivers a clear assessment: Microsoft remains a dominant force in AI and software, benefiting from strong structural tailwinds. However,the market demands more than just growth in Azure – it demands growth that consistently exceeds expectations.
