Microsoft (NASDAQ: MSFT) finds itself under the bullish spotlight, as Citi analysts have initiated a 90-day “positive catalyst watch” on the tech giant’s stock.
The primary driver behind Citi’s reinforced conviction is the belief that current Street estimates for Microsoft’s Azure cloud computing platform, particularly for fiscal year 2026 (FY26), are significantly too low.
Azure’s growth
Citi’s analyst, Tyler Radke, maintained the buy rating and gave a target price of $605, indicating a 28% upside from Tuesday’s closing price.
Radke is particularly bullish on Azure’s growth trajectory.
Citi’s analysis, which includes “exit rate math and capex ROI analysis,” suggests that Azure’s momentum is accelerating beyond consensus expectations.
They note that Azure’s revenue growth reached 35% year-over-year in constant currency during fiscal third quarter 2025 (F3Q25), a performance described as one of the biggest beats and quarter-over-quarter reaccelerations in the company’s history.
Furthermore, their data points to an “inflection in March,” with an impressive exit growth rate of 39% year-over-year, comfortably surpassing the company’s own June-quarter guidance of 34-35% and the broader consensus of 32% for FY26.
Based on this deep-dive analysis, Citi is raising its base case estimate, now forecasting 36.1% year-over-year constant currency growth for Azure in FY26, a significant increase compared to the current consensus of 32.1%.
This revised projection is further bolstered by Citi’s capital expenditure (CapEx) return on investment (ROI) analysis, which supports an estimated Azure growth of 37% year-over-year, implying a cumulative revenue of $299 billion over six years from future AI-driven revenue streams.
FY26 revenue
The key catalyst for Microsoft’s stock, according to Citi, is expected to be the company’s fiscal fourth quarter 2025 earnings release, anticipated around late July 2025.
This earnings report will provide crucial insights into Microsoft’s performance and, more importantly, the company’s guidance for FY26.
Citi anticipates that the upcoming guidance will reflect the continued ramp-up of AI revenue from both Microsoft’s own AI products and its strategic partnership with OpenAI.
The firm highlighted that the usage of Microsoft 365 Copilot has already tripled year-over-year, showcasing strong adoption of its AI-powered productivity tools within the enterprise sector.
Microsoft remains Citi’s “top pick in software,” a testament to its perceived defensiveness in a fluctuating macroeconomic environment, its formidable AI product cycle, and the reinforced conviction that Azure’s potential is still largely undervalued by the market.
As the company continues to seamlessly integrate AI capabilities across its vast product ecosystem and strengthen its cloud dominance, analysts expect Microsoft to maintain its leading position and deliver sustained returns for investors.
Microsoft shares gained 0.88% to $475.05 on Wednesday. The stock also reached its all time high of $475.45 in the session.
Microsoft shares have gained 13% in the year and is the second highest gainer among the magnificent seven stocks behind Meta.
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