Microsoft (MSFT) received an Outperform rating from Baird due to its leading role in the artificial intelligence revolution as the financial firm initiated coverage on the tech giant.
Baird also set a $600 price target on the stock.
Despite some concerns over high capital expenditures related to AI, Baird contends Microsoft remains a solid pick for investors in both the near term and the long haul.
“Microsoft is leading the AI revolution with infrastructure and applications, aided by its OpenAI (OPENAI) relationship, providing an end-to-end AI platform for enterprises and consumers alike,” said Baird analysts William Power and Yanni Samoilis in an investor note. “Coupled with its many leading cloud applications, we believe it is positioned to continue to grow revenue double-digits at significant scale, which we expect to stack up well relative to the broader market.”
Microsoft’s capital expenditures are increasing from $88B during 2025 to $143B in 2026. However, Baird still expects Microsoft to generate $74B of free cash flow in 2026 despite the ballooning capex.
Baird pointed out Microsoft’s sustained growth in its Azure and Intelligent Cloud segment. During the first quarter of fiscal 2026, Azure revenue surged 40%.
“While admittedly taking the consensus view, we expect strong double-digit growth coupled with impressive margins to still stack up well relative to the broader market,” Power added. “We view MSFT as a core long-term AI holding, benefiting from its infrastructure, data layer and applications.”