Wall Street's latest vote of confidence in Microsoft
Stifel cites Azure, Copilot and OpenAI revenue share as reasons to buy Microsoft now
You'd think a stock down 2% over the past year might struggle to win over analysts. Instead, Stifel just upgraded Microsoft to Buy from Hold, lifting its price target to $575 from $530, implying roughly 15% upside from Tuesday's close.
Analyst Brad Reback is betting on Azure and Copilot to carry the company through sustained mid-to-upper teens revenue growth.
Reback points to several concrete drivers behind Azure's expected acceleration: operational efficiencies, new datacenter capacity coming online, and a growing revenue share from OpenAI, even as the cloud unit navigates capacity constraints.
He also flagged something less obvious: Microsoft's position as an open-weight model advancement has strengthened its strategy of staying agnostic across large language models within Azure and Copilot.
Product improvements across Microsoft 365 should keep Copilot adoption climbing, according to Reback, while rising GitHub consumption adds another layer of support to that mid-to-upper teens growth target.
Microsoft is already reporting revenue growth of 17.79% for the last twelve months, and estimates call for a further 18% growth in the coming months.
The cancellation of payments to OpenAI due to changes made to the contract in April, coupled with prudent capital spending and controlled operating expense growth, should enable Microsoft to maintain its existing operating margins.
Microsoft already boasts a gross profit margin of 67.94%, and healthy cash flow should mean little need for additional financing.
Oppenheimer recently raised its target to $570, Cantor Fitzgerald went further to $608, and JMP Securities upgraded its rating entirely, all citing similar AI-driven growth and capital discipline.
Of 60 analysts tracked by LSEG, 57 now rate Microsoft as buy or strong buy, with InvestingPro data suggesting the stock remains undervalued at current levels.
