Melius upgrades Microsoft to Buy on AI security demand surge

Melius Research has upgraded its rating on Microsoft from Hold to Buy, citing strong demand for AI security and governance solutions. Analyst Ben Reitzes noted that Microsoft's stock has climbed about 40% since its June low of $353, now trading at $517.53. This represents a 39% return over the past six months, bringing shares close to their 52-week high of $553.72.

The firm also raised its earnings estimates, increasing fiscal 2027 projections by 2% and fiscal 2028 by 4%. Melius initiated a fiscal 2029 estimate of $30.77 per share, roughly 7% above consensus. The upgrade comes as enterprises prioritize secure systems for AI models over direct reliance on AI labs, driving demand for Microsoft’s security offerings.

Melius expects Azure to grow over 50% by the fourth quarter of fiscal 2027. The $665 price target set by the firm represents approximately 22 times the estimated fiscal 2029 earnings. InvestingPro analysis suggests Microsoft remains undervalued at current levels, with additional ProTips available to subscribers highlighting the company’s strong fundamentals.

In other news, Microsoft announced the departure of Ryan Roslansky, executive vice president overseeing M365 apps. Piper Sandler raised its price target for Microsoft, citing growth in Copilot and Cowork services, while Bank of America upgraded its view on the healthcare sector. Wells Fargo identified Axsome Therapeutics as one of its top tactical ideas for the fourth quarter.