Microsoft (MSFT) Stock: Citi and Goldman Still See 50% Upside – Time to Buy?

TLDR

• Citi maintained its “Buy” rating on MSFT, citing AI momentum and cloud strength
• Microsoft’s Q2 revenue hit $81.3B, up 17% YoY; net income jumped 60% to $38.5B
• Azure grew 39% YoY; Microsoft 365 Copilot seats up 160% YoY to 15 million paid users
• Goldman Sachs reiterated its Buy rating and $600 price target after Maia 200 chip progress
• 41 of 50 analysts rate MSFT a “Strong Buy,” with an average price target of $595.60

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Microsoft (MSFT) is getting renewed attention from Wall Street, with both Citi and Goldman Sachs reaffirming their Buy ratings on the stock in recent days.

Microsoft Corporation, MSFT

MSFT is currently trading around $397, down roughly 30% from its all-time highs, giving it a market cap of $2.9 trillion.

Citi analyst Tyler Radke kept his Buy rating after speaking with Microsoft’s investor relations team. His focus was on three areas: AI competitive positioning, cloud capacity management, and capital spending priorities.

In the December quarter, Microsoft posted revenue of $81.3 billion, a 17% increase year-over-year. Net income nearly doubled compared to the prior year, coming in at $38.5 billion — up 60%.

Cloud was a standout. Microsoft’s cloud business crossed $50 billion in quarterly revenue for the first time, growing 26% year-over-year.

Azure, the engine behind that growth, expanded 39% in the quarter. Demand is currently outpacing supply, but Microsoft has a plan to close the gap.

Part of that plan involves its own chip. The Maia 200 AI inference accelerator delivers more than 30% improved cost efficiency compared to the previous generation, according to CEO Satya Nadella.

Maia 200 Catches Goldman’s Eye

Goldman Sachs analyst Gabriela Borges reiterated a Buy rating and $600 price target after Microsoft’s Maia 200 announcement in January.

Before the update, Maia had limited benchmark data and was generally seen as trailing competitor chips. Goldman says performance is now more comparable to Amazon’s Trainium and Google’s TPUs on raw compute.

Goldman flagged this as a positive for Microsoft’s price-performance on AI compute and its ability to eventually match CPU-based Azure gross margins on AI workloads. Microsoft’s current gross profit margin sits at 69%, with a return on equity of 34%.

The firm did note some limitations — including the absence of full production performance data and the need to build out the software ecosystem around Maia.

Copilot and GitHub Growing Fast

Microsoft 365 Copilot added seats at a record pace, up more than 160% year-over-year. The product now has 15 million paid seats and Radke says it’s becoming a genuine growth driver for Microsoft’s commercial software division.

GitHub Copilot now counts 4.7 million paid subscribers, up 75% year-over-year.

Dragon Copilot, used in healthcare settings, is documenting 21 million patient encounters per quarter.

Over 80% of Fortune 500 companies have active AI agents built on Microsoft’s tools.

Out of 50 analysts covering MSFT, 41 rate it a “Strong Buy,” four say “Moderate Buy,” and five say “Hold.” The consensus price target is $595.60.

Analysts project Microsoft’s revenue to grow from $281.72 billion in fiscal 2025 to $591 billion by fiscal 2030, with earnings per share rising from $13.64 to $31.84 over the same period.

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