Microsoft (MSFT, Financial) has received a Sector Outperform rating from Scotiabank, which highlights the company's strong AI positioning and growth potential. Analysts, led by Patrick Colville, believe 2025 will be a pivotal year as customer investments in Azure and Microsoft 365 Copilot accelerate.
Scotiabank set a $470 price target on the stock, citing Microsoft's deep partnerships, existing customer base, and AI expansion as key advantages.
AI to Become a Major Revenue Driver
The firm estimates 60% of companies are now using foundational AI models in public cloud environments, with Azure well-positioned to capitalize on rising AI spending. Microsoft's annual AI revenue run rate reached $13 billion in fiscal Q2 2025, and Scotiabank projects it could exceed $50 billion by 2027.
Azure, which generated $56 billion in revenue in FY24, is forecasted to grow to $126 billion by FY27, with AI services expected to account for over 50% of new revenue.
Copilot Expansion & Long-Term AI Growth
Microsoft 365 Copilot adoption is also expected to surge from 5.5 million users today to 43 million by 2027. Meanwhile, Copilot Studio, Microsoft's AI agent-building platform, is seen as a future revenue opportunity, though Scotiabank notes it may take another year to gain traction as most enterprises remain in the pilot phase.
