Wells Fargo Lifts Microsoft’s Price Target to $585
Wells Fargo kept on June 24, 2025, an ‘Overweight’ rating on Microsoft. Price target was increased from $565 to $585.
“Our scenario analysis for MSFT’s AI biz suggests $100B+ upside case by FY29 and importantly, we expect MSFT’s AI narrative increasingly shifts toward app layer/Copilot this yr.
Remain constructive on MSFT positioning & path ahead; raise PT to $585.
AI Biz Reaches $100B+ FY29 Revenue In Upside Case: MSFT scaled its AI biz to $13B ARR in less than 3 yrs, its fastest product ramp ever—despite considerable capacity constraints.
We est this biz nears $20B exiting FY/Jun’25 & scales further as constraints ease/capacity comes online.
In upside case, revs climb to $100B+ by FY29 w/ net new revsgrowing >25% y/y each yr. In base case, model net new revs growing double-digit each yr, or FY29 AI revs of $80B+.
Copilot Contribs Layering In FY26; Med-Term Path To $10B+ Looks Achievable:
While Copilot’s ratable rev rec means slower contribs to date vs Azure AI (est ~90% of $13B ARR metric was attributable to Azure AI), see FY26 as when Copilot begins reaching critical mass.
Over time, est that MSFT could reach $12B in ARR from Copilot w/ just 10% penetration & modest discounting (~43M seats, 20% discount). See enterprise SKUs as most likely target, which comprise ~320M of its 430M seats (~75% of total).
Target Price Valuation for MSFT: $585 from $565
Our $585 PT is derived from 35x P/E on our Fwd NTM estimates, an admitted premium, but one we think is warranted given the unprecedented scale + durability of this biz and series of favorable LT tailwinds still ahead.
The current AI-focused CapEx build cycle continues to impact FCF multiples; therefore, we remain focused on P/E multiples in the interim.
Risks to Our Price Target and Rating
(1) Competition—Increasing competition, particularly from large tech vendors such as Google, Facebook, Amazon, among others;
(2) Increasing regulatory scrutiny—Technology companies have increasingly seen scrutiny from regulatory agencies and governments globally over the past several years, specifically, anti-trust concerns;
(3) Cybersecurity Risks; and
(4) Margin compression—from Azure/OpenAI investments.”
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