Microsoft (NASDAQ:MSFT) is in a three-horse race with Amazon/AWS and Google/GCP for enterprise hyper-scale AI supremacy – and among the three, it’s the one best-positioned to capture the biggest share of the opportunity.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
That’s the view of Wedbush analyst Daniel Ives, who argues that despite intensifying competition from its mega-cap peers, Microsoft continues to lead the field in scaling and monetizing enterprise AI.
“The core driver of the impressive Azure value proposition and MSFT next-gen enterprise stack is AI….and this dynamic is just starting to take shape in the field in our view,” said Ives, who ranks among the top 4% of Street stock experts.
Ives’ comments come ahead of Microsoft’s FY1Q26 earnings next Wednesday (October 29), with the analyst anticipating another strong quarter, setting the scene for a fiscal year that will represent the “true inflection year of AI growth.”
Backing that view, Ives points to accelerating momentum for Copilot adoption, estimating the initiative could add roughly $25 billion in incremental revenue in FY26, a figure he says Wall Street has yet to price in. The analyst also considers the Street’s projection of 37% Azure growth conservative, citing continued migration from on-prem to cloud, expansion of cloud-native apps, and surging AI workloads. These tailwinds are fueling what Ives describes as “accelerated deal conversions” for large-scale enterprise AI deployments, with Microsoft’s customers rolling out new AI use cases across multiple sectors.
“We believe that over 70% of MSFT’s install base will ultimately leverage its AI functionality across the enterprise/ commercial landscape over the next 3 years,” Ives added.
To support this demand, Microsoft is “doubling down” on AI infrastructure, guiding for about $30 billion in capex for FY1Q26 – an annualized pace of roughly $120 billion. That level of investment signals not only the company’s confidence in sustained AI-driven growth but also its intent to expand its data center footprint to stay ahead of capacity constraints.
For Ives, the message is clear: Microsoft’s next growth leg will be powered by cloud and AI monetization, which together will increasingly drive both revenue and margins. As more enterprises deepen their strategic AI partnerships with Microsoft into FY26, the analyst argues the Street continues to underestimate the company’s upside potential.
“We believe the stock has yet to price in what we view as the next wave of cloud and AI growth coming to the Redmond story with a strong competitive cloud edge vs. Amazon and Google in cloud bake-offs,” the 5-star analyst further said.
All told, Ives assigns MSFT an Outperform (i.e., Buy) rating, with a $625 price target implying about 20% upside over the next 12 months. (To watch Ives’ track record, click here)
The consensus on Wall Street echoes his optimism; all 34 analysts covering the stock rate it a Buy, giving Microsoft a unanimous Strong Buy consensus. The $627.98 average price target aligns closely with Ives’ forecast, suggesting a potential one-year gain of roughly 21%. (See MSFT stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.