Morgan Stanley sees 50% upside for Microsoft on Azure and Copilot
Analyst Adam Wood says investors are undervaluing Microsoft’s AI strategy, with Azure and Copilot positioned to lift revenue.
By Frankie Delgado · News Reporter
3 min read
Microsoft’s stock could climb about 50% from current levels if its artificial-intelligence bets start paying off the way Morgan Stanley expects.
Morgan Stanley analyst Adam Wood began coverage of Microsoft on Tuesday with an overweight rating and a $600 price target, according to MarketWatch. Wood pointed to two big pieces of the company’s AI push, Azure and Copilot, as the main reasons he thinks the market is underestimating the software giant.
Microsoft shares have struggled this year. MarketWatch reported the stock is down roughly 15% so far in 2026, though it has gained 13% since touching a recent low on June 25.
Azure gets a second look
Wood wrote that Azure, Microsoft’s cloud business, is one of the clearest signs that the company’s AI spending can turn into lasting value. His view is that investors are treating Azure too much like a basic AI infrastructure vendor, where customers buy computing power and little else.
That misses a bigger point, according to Wood. He said Microsoft’s setup gives Azure a way to pull customers into higher-value services across the company’s broader software lineup.
In plain English: Wood thinks Azure is not just renting out AI horsepower. He sees it as a gateway that can help Microsoft sell more of its business software to customers already paying for cloud and AI capacity.
Copilot’s revenue engine
Copilot, Microsoft’s AI assistant, is the other piece Wood highlighted. He said investors are not giving enough credit to the way Microsoft can make money from Copilot’s pricing model.
According to Wood, Copilot can lift average revenue per user in three ways: selling more Copilot seats, pushing customers toward Microsoft’s M365 E7 subscriptions, and adding a consumption-based model tied to usage.
Before Copilot, Wood said Microsoft’s revenue growth was tied mainly to adding seats and selling customers upgraded licenses. With Copilot, he wrote, Microsoft can charge for both the users and how much they use the product.
Wood said that as companies adopt AI more broadly, and as they use agents, reasoning tools and workflow automation, Copilot and the wider E7 opportunity could become one of Microsoft’s most significant chances to expand average revenue per user.
The orchestration pitch
D.A. Davidson analyst Gil Luria recently made a related case for Microsoft, according to MarketWatch. In a note earlier this month, Luria wrote that business customers may decide they do not want to work directly with frontier AI labs such as OpenAI and Anthropic.
Luria said companies may want a way to switch between AI models without disrupting their operations. He argued that Copilot can fill that role as an orchestration layer.
While some investors may have viewed Copilot as an AI model on its own, Luria wrote that it already works as a tool for directing questions and tasks to the right model. He said users can choose models, decide whether to use internal data, pick an agent, or let Copilot route the request in the most efficient and appropriate way.
For Microsoft bulls, that is the pitch: Azure brings the cloud demand, Copilot brings the user and usage revenue, and the platform sits between companies and a fast-changing roster of AI models.
This story draws on original reporting from MarketWatch.