Oppenheimer has upgraded Microsoft (NASDAQ: MSFT) to Outperform from Perform, setting a price target of $600 per share- a nearly 21% increase from the company’s closing price on Tuesday.
The firm believes Microsoft’s long-term potential in artificial intelligence (AI) is still not fully reflected in its stock price.
Microsoft stock, which has advanced over 17% so far in 2025, is widely considered a key player in the AI space due to its strategic partnership with OpenAI, the company behind ChatGPT.
The investment firm sees this collaboration, combined with growing demand for AI solutions, as a powerful catalyst for Microsoft’s continued growth, particularly in its cloud segment, Azure.
Azure and AI synergy viewed as key growth driver
Oppenheimer analyst Brian Schwartz emphasized that Microsoft’s AI revenue stream is poised to become a more central focus for investors, especially as Azure continues to report strong growth.
“Investors’ attention on the ramp of Microsoft’s AI revenue stream will only increase,” he noted, adding that Azure’s performance not only provides valuation support, much like AWS does for Amazon, but also holds meaningful upside as its AI offerings scale rapidly.
Schwartz argued that the market may be underestimating Microsoft’s ability to monetize AI through its cloud services.
He pointed to what he called the “agentic AI era,” suggesting that Microsoft’s AI business could deliver durable consumption growth for Azure even though early responses to products like Copilot have been underwhelming.
The analyst believes the scale and potential of Azure’s AI-driven expansion are still being overlooked by many investors.
“Sustaining robust growth in its AI business is not fully in the stock, nor is a reacceleration in Azure’s growth in FY26,” Schwartz said.
He added that a continued strength in the AI cycle should support Azure’s usage and reinforce Microsoft’s profile as a reliable earnings compounder.
Microsoft recently cut 9,000 jobs as part of its company-wide restructuring.
Risks remain amid high AI expectations
Despite the optimism, Oppenheimer cautioned that risks remain.
Schwartz flagged the potential for a shift in enterprise sentiment, where companies might start to view AI investments as being targeted toward software that is not yet commercially viable.
“This development would impact the usage and financial outcome for Azure, and diminish the credit Microsoft is currently receiving in multiples as a perceived AI winner,” he explained.
Nonetheless, the upgrade reflects Oppenheimer’s broader belief that Microsoft is well-positioned to benefit from the AI boom over the long term.
As AI integration deepens across industries, the firm’s analysis suggests that Microsoft’s strong cloud infrastructure, enterprise presence, and close ties with OpenAI provide it with a structural advantage in the evolving software landscape.
With the company’s AI business scaling quickly and investor focus intensifying, Microsoft remains a central figure in the AI investment narrative-one that Oppenheimer believes still has meaningful room to grow.
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