Jefferies Calls for Microsoft Narrative Reset Ahead of Q3 After 12% Drop

Jefferies says it's time to reset the bullish narrative on Microsoft shares, down 12% since Q2 results amid Azure and M365 concerns, highlighting Q3 M365 13-14% constant-currency growth guidance, Copilot revenue potential, and Azure's modest beat potential (37-38% vs. Street ~40%). Earlier analysis post-Q2 selloff noted management guiding a sequential Q3 CapEx decline after 66% YoY surge to $37.5B, with Azure ~38% growth outpacing supply and a $600 12-month target. The firm models $141B FY26 and $155B FY27 capex alongside 18% operating income growth, viewing 21x CY27 earnings as discounted vs. Alphabet (28x) and Amazon (25x).