Microsoft stock jumps 2% on Melius Research upgrade to Buy
Microsoft's stock surged by 2% to $527.29 after Melius Research upgraded its rating to Buy from Hold, setting a $665 price target. The firm argues that corporate concerns over AI security and governance are driving demand for Microsoft's software, positioning the company as the trusted vendor in the AI landscape.
Melius Research highlights Microsoft's strong performance in its latest quarterly results, with Azure growing 43% and commercial remaining performance obligations rising 84% to $678 billion. This supports the thesis that businesses are turning to Microsoft for reliable AI solutions. Meanwhile, rival cloud stocks Amazon and Alphabet remained relatively unchanged, indicating that the buying interest is focused on Microsoft.
Microsoft's valuation at 25x forward earnings suggests continued confidence in its AI execution. CEO Satya Nadella expressed strong confidence in the company's long-term growth prospects during the July 29 earnings call, citing over 30 million paid Microsoft 365 Copilot seats and nearly 40 million agents registered with Agent 365. The company also emphasized its MAI Cyber One Flash model, which outperformed larger models at half the cost.
The next quarterly report will be crucial in testing the upgrade thesis. Microsoft's guidance for Q1 FY2027 revenue between $89.85 billion and $90.95 billion will need to reflect enterprise demand tied to AI trust to sustain the stock's upward momentum.