A recent Citibank research report underscores Microsoft (MSFT, Financial) as the preferred choice in the software industry due to its defensive positioning in a volatile macroeconomic environment and the promising cycle of its AI products. The bank maintains a "buy" rating, raising the target price from $540 to $605.
The report highlights the potential underestimation of Azure's fiscal 2026 forecast. Following the pandemic, which accelerated customer adoption and consumption, generative AI is expected to usher in a new growth era for Azure. The introduction of generative AI and Co-Pilot features is enhancing digital productivity and collaboration, likely leading to sustained impacts on Microsoft's productivity business. This is anticipated to drive incremental demand and adoption.
The bank forecasts that Azure's revenue for fiscal 2026 could recover to an annual growth of nearly 37% (36% at constant currency rates).
