Microsoft Corp (NASDAQ:MSFT) remains well-positioned for AI-driven growth, but near-term stock movement hinges on Azure performance and Copilot adoption, according to a BofA Securities analyst.
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Azure Growth Hinges On AI Capacity
Analyst Tal Liani expects Azure growth to depend on how quickly new AI capacity comes online. Microsoft posted 38% constant-currency growth last quarter, and the analyst models about 37.5% growth for the fiscal third quarter, in line with expectations.
He notes that demand remains strong, but limited capacity continues to cap growth. Future expansions and infrastructure buildouts later in fiscal 2026 could unlock further upside. The analyst suggests the stock may need an Azure growth beat to move higher.
Copilot Adoption Key To AI Returns
The analyst highlights Copilot adoption as a critical factor in proving returns on AI investments. Copilot usage stood at roughly 15 million seats, or about 3.5% of Microsoft 365 users, in the prior quarter.
He expects stronger adoption to support revenue per user growth and ease concerns about competition from other AI platforms as Microsoft expands features and integrates Copilot more deeply into its enterprise ecosystem.
Steady Core Business Supports Outlook
The analyst projects Microsoft 365 revenue to grow 15.1% year-over-year, alongside continued Dynamics growth and improving advertising trends at LinkedIn. He expects these segments to help drive about 11% growth across the broader business.
He maintained a Buy rating and a $500 price forecast, supported by Microsoft's strong enterprise position, steady cash flow base, and continued demand for AI-driven services.
Liani expects a third-quarter revenue of $81.395 billion and EPS of $4.05.
MSFT Price Action: Microsoft shares were up 1.83% at $427.93 at the time of publication on Friday, according to Benzinga Pro data.
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