JPMorgan expects Microsoft's stock to rise by 25%. Where does it see a twofold benefit for the company?

Microsoft shares, which have so far underperformed the market, could rise by about 25% by the end of next year, according to JPMorgan. It was one of the first major Wall Street investment banks to raise its rating on Microsoft after the company reported accelerating revenue growth for its Azure cloud service.

JPMorgan's new price target for Microsoft shares for December 2027 is $625, up from the previous $550, according to Seeking Alpha. The rating remains at "Overweight," which corresponds to a "buy" recommendation.

The growing demand for AI infrastructure and its use in Microsoft’s own cloud products create a dual opportunity for the company’s revenue growth, according to JPMorgan analyst Samik Chatterjee, as quoted by Yahoo Finance.

“We view the company’s outlook positively and expect accelerated growth for both the Azure cloud service and Microsoft 365 cloud products, with the development of AI infrastructure serving as a key driver,” Chatterjee wrote in a note to clients. In his view, Microsoft gains an advantage because Microsoft 365 products—including the AI assistant Copilot—themselves become consumers of the company’s AI infrastructure. This allows the company to simultaneously generate revenue from the sale of high-margin software products and from the demand for computing power from AI companies and enterprise customers.

The combination of strong revenue and profit growth with lower capital requirements compared to competitors should allow Microsoft to return to its historically high premium over the broader market—or even exceed it, according to the analyst. This year, Microsoft has lagged significantly behind the broader market: the S&P 500 index has risen by nearly 14%, while the company’s stock has gained less than 3%.

JPMorgan was one of the first major banks to raise its rating on Microsoft following the release of its earnings report, which helped allay investors’ concerns about the company’s prospects, according to Yahoo Finance. In the fourth quarter of fiscal year 2026, Microsoft’s revenue grew by 18% to $90 billion, while Azure and other cloud services saw sales increase by 43%. Azure’s annual revenue exceeded $100 billion for the first time. The results show that enterprise customers are moving from experimenting with AI to large-scale adoption, allowing Microsoft to directly capitalize on the growing demand for the technology, Yahoo Finance notes.

At the same time, Microsoft did not increase its capital expenditures as sharply as some other tech giants, including Alphabet and Meta. The company increased its operating profit by 18% to $40.6 billion and returned $10.2 billion to shareholders during the quarter through dividends and share buybacks.

This article was AI-translated and verified by a human editor