NEW YORK, January 1, 2026, 16:52 ET
- Wedbush’s Dan Ives named Microsoft his top large-cap AI pick heading into 2026 and set a $625 price target.
- Microsoft shares ended 2025 at $483.62, leaving investors focused on whether AI spending turns into profit growth this year.
- Wall Street’s broader view remains bullish, but analysts are split on how fast AI adoption scales and how long heavy spending lasts.
Wedbush Securities analyst Dan Ives has put Microsoft (MSFT.O) at the top of his 2026 artificial intelligence stock list and set a $625 price target after the company’s shares rose about 16% in 2025. “FY26 for Microsoft remains the true inflection year of AI growth,” Ives wrote in a client note, referring to the company’s fiscal 2026 year. 1
The call arrives as investors reset positions after Wall Street posted another year of double-digit gains, a rally fueled in part by enthusiasm for AI-focused stocks. U.S. equities slipped in the final trading session of 2025, underscoring how quickly sentiment can turn at elevated valuations. 2
Why it matters now is simple: 2026 is shaping up as a test of whether big-ticket AI investment translates into broader demand and steadier margins. Microsoft is a bellwether because it sells AI through Azure, its cloud-computing platform, and through workplace subscriptions that many companies treat as essential spend.
Microsoft shares closed at $483.62 on Dec. 31, down 0.79% on the day, according to Investing.com pricing data. 3
Markets Insider data show 97 analysts have a median price target of $549.88, with estimates ranging from $425 to $700, and the stock carrying a consensus “buy” rating based on 96 buy ratings and one hold. The same dataset forecasts Microsoft revenue of about $326.35 billion and earnings per share of $16.09 in 2026. 4
A “price target” is a broker’s estimate of where a stock should trade over the next 12 months. It is not a promise, and targets can change quickly when spending plans or demand assumptions shift.
For Microsoft, bulls are leaning on the idea that enterprise customers will move from pilots to larger deployments of AI tools that run on Azure. Investors will watch whether higher AI usage lifts cloud growth enough to offset the cost of building and operating data centers.
That balance also plays out in competitive dynamics. Azure’s closest rivals are Amazon.com’s AWS and Alphabet’s Google Cloud, while Google’s workplace tools also compete with Microsoft 365 in productivity software.
Microsoft has pointed to pricing power as another lever. The company said it will increase prices for Microsoft 365 productivity suites globally starting July 2026 for commercial and government clients, with small business and frontline worker plans seeing the sharpest increases, Reuters reported. 5
Near-term, supply remains a constraint. Microsoft has said it expects to remain short on AI capacity until at least the end of its current fiscal year in June 2026, Reuters reported. 6
The spending required to close that gap has been a central investor worry. Microsoft reported record capital expenditure of nearly $35 billion for its fiscal first quarter and warned that spending would rise this year, reversing an earlier expectation that it would moderate, Reuters reported. 7
For Microsoft stock in 2026, analysts are effectively weighing two curves: how quickly customers scale AI usage and how long costs stay elevated as the company expands infrastructure. The next set of quarterly updates on cloud growth and AI profitability is likely to set the tone for whether the bullish targets hold.
