Last week, you might have seen that Microsoft Corporation (NASDAQ:MSFT) released its third-quarter result to the market. The early response was not positive, with shares down 2.4% to US$414 in the past week. Microsoft reported US$83b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$4.27 beat expectations, being 5.5% higher than what the analysts expected. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

Taking into account the latest results, the consensus forecast from Microsoft's 51 analysts is for revenues of US$382.9b in 2027. This reflects a sizeable 20% improvement in revenue compared to the last 12 months. Per-share earnings are expected to expand 16% to US$19.53. In the lead-up to this report, the analysts had been modelling revenues of US$378.9b and earnings per share (EPS) of US$18.94 in 2027. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

There's been no major changes to the consensus price target of US$562, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Microsoft, with the most bullish analyst valuing it at US$730 and the most bearish at US$400 per share. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that Microsoft's rate of growth is expected to accelerate meaningfully, with the forecast 16% annualised revenue growth to the end of 2027 noticeably faster than its historical growth of 13% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 16% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that Microsoft is expected to grow at about the same rate as the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Microsoft's earnings potential next year. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that in mind, we wouldn't be too quick to come to a conclusion on Microsoft. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple Microsoft analysts - going out to 2028, and you can see them free on our platform here.

Don't forget that there may still be risks.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.