Morgan Stanley analysts have initiated a bullish projection for Microsoft (MSFT) stock based on favorable software spending plans. This past week, analysts labeled MSFT as an “overweight” stock, maintaining a price target of $650. This forecast suggests an upside potential of nearly 38%.
Microsoft has kicked off 2026 on the wrong foot, with shares falling 4% since January 1. Fortunately, Morgan Stanley doesn’t see this bear streak lasting much longer. While indicating favorable software spending plans, the analysts’ recent report outlined expectations of software spending growth to increase by 9 basis points YoY, from 3.7% in 2025 to 3.8% in 2026. Microsoft is poised to benefit from this strengthening environment as CIOs anticipate 7.3% growth for the company in 2026.
In addition, Microsoft also stands to benefit from its recent AI investments and development efforts. Recently, the company announced plans to build a new facility on a 237-acre site in Lowell Township, Michigan. The move sent MSFT stock higher this past week, but it was soon corrected after concerns were raised about the energy costs the data center would incur. At press time, MSFT is trading in the middle of its 52-week range and below its 200-day simple moving average.
Furthermore, numerous Wall Street analysts have upped their forecasts for Microsoft (MSFT) stock in 2026. Wedbush’s Dan Ives calls Microsoft a “core winner” for 2026, arguing that Azure could move from pilots to broad enterprise deployments as CIO budgets shift. Evercore ISI’s Julian Emanuel adds a cautionary note but says systemic risks tied to the AI trade remain limited, given healthy hyperscaler balance sheets and muted cross-holdings.