Citi analysts have raised their price target for Microsoft stock to $520 from $495, while maintaining a Buy rating. This increase follows positive headlines from OpenAI, suggesting strength in Microsoft’s Azure cloud platform, but Citi notes that expenses may be underestimated. Recent reports indicate OpenAI has doubled its annualized revenue to $3.4 billion, with expanded cloud contracts with ORCL.
The analysts believe consensus models may not fully account for potential losses Microsoft could incur from its stake in OpenAI, particularly in the non-operating expense line. They estimate this could result in a $0.04 to $0.05 overstatement in EPS estimates for upcoming quarters, although it is not considered significant given the scale of Microsoft’s business.
Citi slightly decreased its near-term EPS estimate by around 1% for 4Q24 and 1Q25, projecting $3.08 per share compared to the consensus of approximately $3.15. However, they raised their estimates for FY27 and beyond. Overall, the outlook for Microsoft remains positive, but analysts caution that potential expenses related to OpenAI should be factored into future earnings calculations.
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