BofA says Microsoft’s AI party still has room

The AI story still has a few plot twists

Microsoft is getting another thumbs-up from Wall Street, and this one comes with a very specific message: the AI rally isn’t dead, but it does need a bigger engine. BofA Securities’ Tal Liani kept a Buy rating on MSFT and left a $500 price target in place, basically saying, “Yes, the AI story is real — now prove you can keep up with demand.”

Azure: the traffic jam in the fast lane

The analyst’s big watch item is Azure growth, which he thinks will keep leaning on how fast Microsoft can bring new AI capacity online. Demand is still strong, but capacity limits are acting like a bottleneck on a highway during rush hour. Microsoft just posted 38% constant-currency growth last quarter, and BofA is modeling about 37.5% for fiscal Q3 — solid, but not the kind of number that makes the stock do backflips unless it beats.

Copilot has to become more than the office party trick

Then there’s Copilot, which is where Microsoft needs to show it can turn all that AI hype into recurring dollars. Usage was around 15 million seats last quarter, or roughly 3.5% of Microsoft 365 users. BofA thinks better adoption could lift revenue per user and help calm the usual investor worry: “Cool demo, but does anyone actually pay for this?”

Why investors should care

The rest of the business still looks sturdy enough to hold the whole machine together. BofA expects:

• Microsoft 365 revenue to grow 15.1% year over year
• Dynamics to keep growing
• LinkedIn ads to keep improving
• Overall business growth of about 11%

Microsoft shares were up 1.83% to $427.93 when this crossed the tape, which tells you the market still likes the AI setup — it just wants proof the gears are turning, not just glowing blue on stage. Big picture: Microsoft’s AI trade is still alive, but the stock probably needs Azure capacity and Copilot adoption to cooperate before the next big move shows up.