Benchmark Raises Microsoft Price Target to $525

Benchmark analyst Yi Fu Lee raised the price target on Microsoft (NASDAQ: MSFT) to $525.00 (from $450.00) while maintaining a Buy rating.

“We reiterate our Buy rating and are increasing our price target from $450 to $525 on sequential quarter over quarter momentum in F3Q26 ending 3/31.

Microsoft delivered a solid quarter, exceeding FactSet consensus on revenue (+1.8% beat), Azure cloud growth (1.1% upside), operating income/margin (+4.2% beat), and free cash flow/margin (+2.9 upside).

Outsized fiscal YTD capex exceeding $100 billion on limited ROI is the top investor concern, and we believe the company’s transparency in messaging the pipeline of heavy customer demand should alleviate this fear.

We are clearly seeing signals of AI monetization with AI annual revenue run-rate up +123% y/y to over $37B, and paid M365 Copilot seats up +33% q/q to +20M.

Microsoft Cloud cleared $50B last quarter and expanded profitably +29%/+25% in constant currency (cc) at scale to $54.5B; this business alone is on track to clear $200B this FY26 in our view.

Commercial bookings decreased 4%/6% in cc when including the Azure commitment from OpenAI, which will likely raise optics noise, but we would point out AI agents are billed as consumed and likely bypass the traditional booking method.

Commercial remaining performance obligation (RPO) paints a better picture, up +99 y/y to $627B on a weight average contract duration of 2.5 years supported by long term commitments from OpenAI.

It is comforting to hear preliminary FY27 revenue and operating income guidance is expected to grow double digits y/y underpinned by a focused drive to deliver AI solutions.

As such, MSFT remains a core SaaS/software holding.”

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