Key Takeaways:
- Morgan Stanley reaffirms Microsoft buy rating with $650 price target
- 62% of CIOs plan to increase Azure spending, up from 57% in Q2 2025
- Microsoft reports fiscal Q4 results on July 29 with focus on Copilot adoption
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Morgan Stanley reaffirms Microsoft buy with $650 target on rising CIO spending
Microsoft's GenAI leadership is "clear" as CIO spending intentions for Azure and M365 strengthen, Morgan Stanley said.
Analyst Josh Baer reaffirmed his buy rating and $650 price target on the software maker, citing strong demand trends across Microsoft 365, Copilot and Azure cloud services. The $650 target implies about 62% upside from Thursday's close of $401.10, well above the $559.63 average among 42 analysts covering the stock.
Morgan Stanley's latest CIO survey showed 62% of chief information officers expect to increase Azure spending over the next 12 months, up from 57% in the second quarter of 2025. For Microsoft 365 and Office 365, 65% of CIOs plan to boost expenditure, rising from 46% in the second quarter of 2024 and 55% in the same period last year. Half of surveyed CIOs projected using the premium E5 suite next year, while 21% plan to transition to the more expensive E7 tier — an upward migration that could lift per-seat revenue. The 7.6% projected spending growth across Microsoft products was the strongest among all surveyed vendors, outpacing spending plans for other enterprise technology providers.
The bullish call comes ahead of Microsoft's fiscal fourth-quarter results due July 29, where investors will focus on Copilot adoption and AI revenue generation. Microsoft shares rose 1.4% on Thursday to $401.10 after touching an intraday high of $405.99. The stock trades at about 16 times projected fiscal 2028 earnings, a level Baer considers attractive relative to Azure's expansion potential. The survey data reinforces Microsoft's competitive position against cloud rivals Amazon Web Services and Google Cloud in the race to monetize generative AI at the enterprise level.
The reaffirmed target shows Morgan Stanley's conviction that enterprise AI spending remains in early innings despite broader concerns about infrastructure costs. Microsoft's quarterly report on July 29 will provide the next major test of whether surging CIO interest is translating into measurable revenue growth, with Copilot penetration a key metric for the market.
This article is for informational purposes only and does not constitute investment advice.
