Microsoft keeps Outperform rating as Wedbush sees ‘robust’ Q4 results

Wedbush maintained its Outperform rating and $600 price target on Microsoft’s (NASDAQ:MSFT) stock ahead of the company’s fiscal year 2025 fourth quarter results on July 30.

“We are expecting more good news next week from Redmond as we believe Nadella & Co. will deliver another robust quarter on Wednesday after the bell driven by the AI Revolution with all the Street and tech world watching closely,” said analysts led by Daniel Ives.

The analysts believe the path to $4T market cap is ahead and then $5 trillion is on the docket over the next 18 months.

The analysts noted that they have seen deal conversions for broader enterprise scale AI deployments “accelerating” in the field as the AI Revolution takes hold and many Microsoft customers now focused on deploying enterprise use cases across several verticals with financials, government, and retail clear standouts.

“We strongly view this as Microsoft’s “shining moment” with AI set to change the cloud growth trajectory in Redmond,” said the analysts.

The analysts believe the next three years over 70% of the company’s installed base will ultimately be on this AI functionality for the enterprise/commercial which changes the landscape and growth trajectory for Microsoft going forward. While AI use cases are building markedly in fiscal 2025 it is clear fiscal 2026 for Microsoft remains the true inflection year of AI growth, according to the analysts.

The analysts believe the stock still has yet to price in what they view as the next wave of cloud and AI growth coming to the Redmond story with a strong competitive cloud edge versus Amazon (AMZN) especially and Google (GOOG) (GOOGL) in “cloud bake offs.”

Ives and his team said that their recent partner checks have been incrementally strong around Copilot deployments with Microsoft customers and ultimately Wedbush estimates this could add about $25B to the company’s topline trajectory by 2026.

“Our thesis remains that the cloud and AI monetization is going to comprise a bigger and bigger piece of Redmond going forward and will ultimately spur growth and margins over the coming years,” said Ives and his team. “We believe Microsoft is just hitting its next phase of monetization on the AI front and more enterprises are accelerating their AI budgets and strategic footprint with Redmond into FY26 with the Street not fully appreciating the growth story.”