Investment firm Morgan Stanley has slightly lowered its growth forecasts for tech giant Microsoft (MSFT) due to continued economic uncertainty. Still, the firm believes that Microsoft is well-positioned for long-term success, especially in artificial intelligence. Nevertheless, Azure’s expected growth for the third quarter of Fiscal Year 2025 was reduced from 31.5% to 31%, and fourth-quarter growth was cut from 32% to 30%. For Microsoft 365 Commercial Cloud, Morgan Stanley now expects 13.5% growth in Q3 (down from 14%) and 12% in Q4 (down from 13%).
As a result, Microsoft’s stock is down at the time of writing. Over the past year, its share price has dropped by 8%, while the broader large-cap software sector is up about 19%. This has caused some investors to worry. Morgan Stanley analysts, led by five-star analyst Keith Weiss, said that economic uncertainty is causing customers to delay big software purchases. They also pointed to slower-than-expected progress in Microsoft’s partner network and the rollout of its AI tool, Copilot, as reasons for the lower estimates.
However, even with these near-term challenges, Morgan Stanley remains positive on Microsoft’s AI future. Indeed, in a recent CIO survey, 35% said that Microsoft is most likely to gain the largest share of AI spending in 2025. In newer AI areas like virtual agents, 32% of CIOs plan to use Microsoft, thanks to the company’s strong position with Microsoft 365 Copilot.
Is MSFT Stock a Buy?
Overall, Microsoft stock has a Strong Buy consensus rating among 35 Wall Street analysts. That rating is based on 32 Buys and three Holds assigned in the last three months. Furthermore, the average MSFT price target of $509.18 per share implies 32.5% upside potential.
