Bank of America lifts Microsoft target to $600, sees 20% upside

Bank of America raised its price target on Microsoft to $600 from $500 and kept a Buy rating in a Tuesday research note. The new target is based on 28 times the bank’s calendar 2027 earnings-per-share estimate, up from 24 times previously, and implies roughly 20% upside after a nearly 30% share gain since the end of July. The stock recorded its strongest six-day stretch since October 2025 during the recent rally.

Analyst Tal Liani pointed to Microsoft’s fiscal fourth-quarter results as the trigger for the reassessment. Azure revenue growth accelerated to 43% year over year, and the company guided to 45% growth for the current quarter, figures that exceeded Wall Street expectations and helped drive the post-earnings gains.

On the AI side, paid Copilot seats have topped 30 million, with net new additions more than doubling from the prior quarter. Liani described Microsoft’s approach as building a full-stack portfolio of internal and third-party models, writing, “Microsoft is building a broad portfolio of internal and external models, allowing customers to use the most cost-effective model for each task, while governing users actions.”

The note also outlined efficiency gains at the infrastructure level. Engineering improvements across Microsoft’s CPU and GPU fleet and software optimization have increased throughput for Copilot workloads about fourfold since the start of the year. The bank highlighted Microsoft’s MAI-Code-1-Flash model as matching GPT-5.6 performance on common Excel tasks at lower cost, and said the Maia 200 chip that powers Microsoft AI models can be up to 40% cheaper to operate than traditional Nvidia hardware.

Those technology and cost improvements factor into Bank of America’s outlook for Azure. The bank now projects Azure revenue will grow 41.8% in fiscal 2027, compared with an estimated 39.9% in fiscal 2026, citing continued capacity buildout, faster deployment and greater efficiency.

Bank of America framed the current investor question around converting AI spending into faster cloud growth and improved economics. The bank’s analysis indicates that conversion is becoming more visible in Microsoft’s results and operational metrics.