Focusing on the US stock market's fiscal 2026 second-quarter earnings season, signals from the latest report suggest that Microsoft (MSFT)'s recovering share price still has room to climb higher.

JPMorgan analyst Samik Chatterjee issued a bullish note on Microsoft on Thursday, raising the price target from $550 to $625. The revised target represents approximately 30% upside from the current stock price. Chatterjee outlined two key rationales for the upgrade.

First, he stated, "We are positive on Microsoft's growth outlook. With ongoing AI infrastructure buildout, we expect both the Azure cloud business and the commercial M365 cloud business to accelerate." He added, "The M365 cloud product with Copilot is itself an internal demand driver for Microsoft's AI infrastructure. This positions the company advantageously: on one hand, it can leverage computing infrastructure to launch high-margin, differentiated application software; on the other, it can capture third-party AI computing demand from both native AI companies and traditional enterprises."

Second, Chatterjee noted, "Microsoft maintains high revenue and profit growth while having lower capital expenditure requirements than peers. We believe this fundamental backdrop is sufficient to support its valuation returning to—or even exceeding—historical premium levels relative to the broader market."

The company's fourth-quarter fiscal earnings report effectively dispelled bearish concerns, which is the primary reason Microsoft has regained favor on Wall Street—the stock has surged 25% over the past month. Chatterjee's report further reinforced market optimism. The tech giant posted fourth-quarter revenue of $90 billion, up 18% year-over-year. Revenue growth for Azure and other cloud services accelerated to 43%. In terms of scale, Azure's annual revenue has officially crossed the $100 billion milestone, demonstrating that enterprise clients are no longer just testing AI on a small scale but are beginning large-scale deployments.

In short, Microsoft is converting its AI business into tangible revenue. The company also showcased strong operating leverage: despite massive data center expansion, operating profit rose 18% year-over-year to $40.6 billion. CFO Amy Hood steadied market confidence, returning $10.2 billion in cash to shareholders through dividends and share buybacks in a single quarter, while tightly controlling expenses. Unlike other major tech companies like Alphabet and Meta, Microsoft has not significantly raised its capital expenditure plans. Yahoo Finance AlphaSpace data shows that since the earnings release in late July, market expectations for Microsoft's earnings have been consistently revised upward.

Following the earnings release, Chatterjee is among the first Wall Street analysts to significantly raise expectations for Microsoft. Other institutions are likely to follow suit after updating their valuation models and engaging with industry insiders and investors, further boosting their bullish outlook on the company.