A Wall Street firm cut its price targets on Microsoft and 50 other software stocks on Tuesday, citing a weakening macroeconomic outlook for the rest of the year.
"We are lowering revenue and operating income estimates across the software group to reflect heightened macro uncertainty," BofA Securities analysts said in a client note.
The analyst team said first-quarter results are likely unaffected, given that tariff-related stress didn't start until April.
"The BofA economics team is not forecasting a recession at this point," the report said. "However, we expect management teams to lower the outlook for Q2 and the remainder of calendar 2025 on a constant currency basis to reflect added uncertainty."
Analyst Brad Sills reiterated his buy rating on Microsoft stock but lowered his price target to 480 from 510.
On the stock market today, Microsoft stock dipped 0.5% to close at 385.73.
Sills also lowered his price targets on Adobe and Intuit, but kept his buy ratings on them.
When Microsoft reports March-quarter results on April 30, investors will look to its revenue guidance in constant currency as a key indicator. The outlook for its Azure cloud computing business will matter most, Sills said.
Meanwhile, Microsoft last week acknowledged that it is "slowing or pausing" some early-stage data center projects.
"In recent years, demand for our cloud and AI services grew more than we could have ever anticipated and to meet this opportunity, we began executing the largest and most ambitious infrastructure scaling project in our history," Noelle Walsh, president of Microsoft's cloud computing operations, said in a post on LinkedIn.
She added, "By nature, any significant new endeavor at this size and scale requires agility and refinement as we learn and grow with our customers. What this means is that we are slowing or pausing some early-stage projects."
Year to date, Microsoft stock is down 8.5%. It faces investor concerns about the monetization of its heavy investments in generative artificial intelligence.
Microsoft stock is in the IBD Long-Term Leaders Portfolio.
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