Microsoft shares climbed nearly 1.5% to $531.40 in premarket trading on Monday after Guggenheim upgraded the stock to “buy” from “neutral,” citing accelerating artificial intelligence adoption in the company’s productivity and cloud businesses.
The brokerage set a price target of $586, implying a 12% upside from the stock’s last close.
Analyst John DiFucci said it is “clear” that Microsoft, along with other large cloud providers, is a major beneficiary of the AI boom, particularly through its Azure cloud platform.
AI integration drives fresh optimism
Guggenheim highlighted that Microsoft’s productivity suite M365 — which includes Word, Excel, and PowerPoint — gives the company a near-monopoly position in enterprise software.
That dominance, the firm said, allows Microsoft to directly monetize AI tools such as Copilot, the company’s AI assistant integrated into its software products.
“We believe Microsoft has a near monopoly in the Productivity Suite market with its Office offering and therefore has been, and will be able to continue to directly monetise AI offerings (namely Copilot) tied to that product suite,” DiFucci writes in note to clients
Copilot has already helped Microsoft increase subscription prices for its M365 consumer suite, with Guggenheim estimating a 30% boost in revenue from the add-on at nearly full profit margins.
The firm expects similar monetization through Microsoft’s commercial M365 products as the rollout of Copilot expands.
The brokerage also expects Windows to outperform market forecasts in the near to medium term, noting that the division still contributes around 20% of Microsoft’s profits.
Microsoft’s earnings expectations
Microsoft is scheduled to report fiscal first-quarter earnings on Wednesday, with analysts expecting roughly 15% year-on-year revenue growth.
The company is one of four US tech giants — along with Alphabet, Amazon, and Meta — reporting results this week under the shadow of what some analysts call an “AI bubble.”
In the July–September quarter, Microsoft Azure’s revenue is projected to have grown 38.4%, outpacing the 30.1% increase expected for Google Cloud and 18% for Amazon Web Services, according to Visible Alpha data.
Overall, Microsoft’s revenue is expected to rise 14.9% in the quarter, outpacing Alphabet’s projected 13.2% and Amazon’s 11.9%.
Analysts bullish on Microsoft’s AI strategy
According to LSEG data, 61 analysts currently rate Microsoft as a “strong buy” or “buy,” while the rest recommend “hold.”
The median price target stands at $630.
Investors have largely priced in Microsoft’s strengths, Guggenheim said, but the company remains a relatively safe bet amid the AI-driven surge in the technology sector.
“We believe the company is set up well to outperform for the rest of this year,” DiFucci added.
Cantor Fitzgerald analysts also reaffirmed their “Overweight” rating and $639 price target over the weekend, citing strong AI-driven demand for Azure amid ongoing supply constraints for computing power.
While profit growth is expected to slow across the major tech firms due to rising costs, Microsoft remains the only one forecast to avoid a sharp deceleration.
Microsoft shares have risen for six straight sessions and are up 24% so far this year, compared with a 26% gain in the S&P 500 technology index and a 20% rise in the Nasdaq Composite.
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