Microsoft (MSFT, Financial) extends its generative AI investment lead as CIOs plan 6.3% higher AI tool spending.
Morgan Stanley's second quarter CIO survey showed IT budgets and software spending set to grow 3.6% year over year through 2025, down slightly from Q1's 3.7% pace.
Analysts led by Keith Weiss said Microsoft commands the steepest forward growth at 6.3%, down from 6.5% in Q4 2024, and that 67% of respondents expect to boost net spending on Microsoft tools. “Microsoft has maintained its leadership and captured the largest GenAI spend,” Weiss wrote.
Nearly 60% of CIOs plan to boost Azure spending over the next year and 97% expect to adopt Microsoft AI tools, marking the highest AI uptake since this question launched two years ago.
The survey also found 44% of enterprise workloads ran in the public cloud in Q2 2025, up from 40% a year earlier. Weiss noted, “As workloads shift to the cloud, Microsoft and Amazon remain the clear beneficiaries,” underlining Microsoft's edge in capturing incremental IT budgets.
The modest 3.6% software spending forecast reflects macro uncertainty, analysts added, with CIOs citing inflation and rate pressure as they prioritize AI projects. That underscores Microsoft's ability to navigate budgets better than rivals.
Why it matters: Microsoft's AI spending lead could drive cloud revenue growth.
Microsoft's share price is currently near $503, on the back of the robust cloud and AI optimism.
Analysts are sticking with a 12-month average price target at $525.29, a modest 4.37% upside from today's levels.
The bullish case projects MSFT climbing toward $650, signaling roughly 30% further gains, while the most conservative outlook sees $423.
