Key Takeaways
• Wedbush raised Microsoft’s stock price target to $515, citing strong AI-led growth.
• Azure revenue surged 33% year-over-year, with AI contributing significantly to the increase.
• Microsoft reaffirmed $80 billion in capital expenditures for FY2025, with continued increases expected.
• Analysts from RBC, Stifel, DA Davidson, and Raymond James also raised their price targets, showing broad market confidence.
• KeyBanc expressed caution, maintaining a neutral stance due to concerns about AI investment returns.
Wedbush Securities has lifted its price target for Microsoft Corporation (NASDAQ: MSFT) from $475 to $515 while maintaining its “Outperform” rating.
The upward revision comes on the heels of Microsoft’s strong fiscal third-quarter earnings, driven largely by the performance of its cloud platform Azure and aggressive investments in artificial intelligence (AI).
Financial Performance Exceeds Analyst Expectations
Microsoft reported total Q3 FY2025 revenue of $70.1 billion, marking a 13.3% year-over-year increase. Azure stood out with 33% revenue growth, surpassing the forecasted 31%, and AI was responsible for approximately half of this gain.
• Azure’s 33% growth outperformed analyst expectations.
• AI technologies directly contributed 16 percentage points to Azure’s expansion.
• Microsoft’s gross profit margin remained high at 69.41%.
The company maintains a market capitalization of $2.94 trillion, and according to InvestingPro, is currently trading near its fair value.
Strategic Investment in AI and Infrastructure
Microsoft reiterated its capital expenditure guidance of $80 billion for fiscal year 2025, with expectations of further increases heading into 2026. This spending is primarily directed toward expanding its global data center infrastructure to support AI workloads and cloud services.
Earlier market concerns about possible cancellations of data center projects have been addressed. Microsoft confirmed that it is proceeding with all planned infrastructure developments to support the scaling of its AI initiatives.
Market Analysts Respond Positively, With a Note of Caution
Wedbush is not the only firm adjusting its outlook. Analysts at RBC Capital Markets raised their price target to $525. Stifel and DA Davidson increased theirs to $500, while Raymond James lifted its forecast to $490.
These firms cited Azure’s performance and Microsoft’s effective cost management as key reasons for their upward revisions.
• RBC Capital Markets: Raised target to $525.
• Stifel and DA Davidson: Increased targets to $500.
• Raymond James: Revised upward to $490.
However, not all feedback was enthusiastic. KeyBanc Capital Markets maintained a Sector Weight rating. The firm expressed caution around the scale of Microsoft’s AI investments and the uncertainty of long-term return on those expenditures.
Microsoft Bets Big on Sustainable AI Growth
Microsoft’s strategic trajectory—focusing on long-term AI monetization and infrastructure scalability has so far paid off in the form of stronger-than-expected growth in cloud services.
Its significant capital deployment underscores a long-term commitment to remaining a leader in the AI-powered enterprise market.
Still, the road ahead will require Microsoft to balance innovation with cost discipline. As analysts and investors track returns on AI-related spending, Microsoft’s execution in fiscal year 2026 will be crucial to validating its aggressive expansion strategy.
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