Microsoft's AI Upside Underappreciated

Oppenheimer has upgraded Microsoft, suggesting its share price does not fully reflect its artificial intelligence potential. The firm's analysts believe that as Microsoft's AI revenue stream grows alongside Azure's strong performance, investor attention will intensify. This will provide valuation support and potential upside as investors recognise Microsoft as a long-term AI leader.

The analysts highlight Microsoft's unique position as one of the few software vendors capable of delivering a 'Rule of 60' business profile at an unprecedented scale. This refers to achieving strong revenue growth and profitability simultaneously, justifying premium multiples. They also pointed to the opportunity for Microsoft to reaccelerate Azure growth in fiscal year 2026.

Oppenheimer has set a price target of $600 for Microsoft, indicating a potential upside of over 20% from its previous closing price. This upgrade aligns with a broader Wall Street consensus that recognises Microsoft's strong position in the AI landscape.