Microsoft Corp (NASDAQ:MSFT) has earned a repeat 'Outperform' rating from Wedbush analysts after it unveiled the next stage of its AI strategy at its highly anticipated Ignite event on Tuesday.
The company announced several new products across software and hardware, including autonomous agents in Dynamics 365 to automate business processes, Copilot analytics to effectively measure ROI from AI investments, and enhancements to Azure Maia for faster, more cost-efficient AI computing, all aimed at expanding the capabilities of the Copilot AI stack.
"Microsoft has started focusing on building an agentic world that translates into real-time business outcomes with organizations able to securely build, deploy, and scale AI agents that support multiple models with built-in enterprise-grade security as more organizations look to leverage AI for mission-critical applications across user ecosystems with improved quality and faster responses," Wedbush wrote in a note to clients.
"We believe this is the next step on the AI strategic vision for Microsoft and would not be surprised to see an accelerated M&A strategy to help drive this next software stack layer of its AI platform."
Based on their recent analysis, the analysts expect that within the next three years, over 70% of Microsoft's installed base will adopt its enterprise and commercial AI functionality.
"With AI revenues on track to surpass an annual revenue run rate of $10 billion next quarter, this speaks to the eye-popping growth Microsoft is seeing from this once in a 40-year tech transformation," they wrote.
They awarded the stock a $550 price target, implying upside of more than 24% from Microsoft's closing price of about $417 on Tuesday.
"While there remains plenty of Street skeptics on this stalwart, we believe that Microsoft remains in the driver's seat in this AI Revolution as the company continuously adapts its product portfolio to generate elevated use cases for its tech stack leading to accelerated adoption of its growing ecosystem," analysts concluded.