Microsoft rises as one of last analyst holdouts gets bullish

Despite the nearly universally positive view of Microsoft from the analysts, the stock has stalled this year as investors question its heavy spending on artificial intelligence. Photo by Michael Nagle/Bloomberg

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Microsoft Corp. was upgraded to buy from hold at Stifel, in what represents a vote of confidence from one of the few Wall Street’s firms that were cautious on the stock after its lagging run this year. The shares gained 1.3 per cent on Wednesday.

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Analyst Brad Reback raised his price target from US$530 to US$575, in line with the average of other analysts who track the company. It represents upside of almost 16 per cent from Tuesday’s close of US$498.

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“We are increasingly comfortable with the company’s ability to sustain mid/upper teens revenue growth as open-weight model advancement has boosted management’s LLM agnostic strategy,” Reback wrote in a note to clients, referring to large language models. He added that the company’s “operational efficiencies are supportive of stable operating margins,” while strong cash flows “should limit the company’s need for outside financing.”

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With the upgrade, skeptics on Microsoft are increasingly hard to find. Sixty-eight of the analysts who cover the stock recommend buying it, representing about 96 per cent of the firms tracked by Bloomberg. The rest, amounting to three other firms, have the equivalent of hold ratings. No analysts recommend selling.

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The stock is up less than five per cent this year, well behind the 21 per cent gain of the Nasdaq 100 Index. Outside of Tesla Inc., which has dropped 15 per cent in 2026, Microsoft is the weakest performer among the Magnificent Seven this year, the group has risen 11 per cent.

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Despite the nearly universally positive view of Microsoft from the analysts, the stock has stalled this year as investors question its heavy spending on artificial intelligence and debate the how AI will affect the business of legacy software providers.

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However, Microsoft reported blowout results in late July that showed the fastest cloud-computing growth in four years, easing investor concerns about its AI strategy. The stock saw its biggest one-day jump since October 2008 in the wake of the report.

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Stifel wrote that Microsoft “clearly turned the corner” with that report, allowing recent stock momentum to continue in the second half of the year.

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