‘It’s a Mixed Picture,’ Says Barclays as Microsoft Stock (MSFT) Faces AI Doubts

Microsoft (NASDAQ:MSFT) hasn’t exactly had a smooth start to 2026, with the stock falling ~23% year to date. While a shaky macro backdrop has weighed on the broader tech space, Microsoft’s pullback appears to be driven more by investor unease around elevated AI-related CapEx and growing doubts about whether its AI offerings are translating into meaningful enterprise adoption.

To better gauge current end demand, positioning, and adoption of Microsoft’s AI offerings, along with other revenue drivers such as the pace of cloud migrations, Barclays analyst Raimo Lenschow recently held a call with one of Microsoft’s larger resellers.

While the reseller expressed optimism about the long-term positioning of Copilot and the new Microsoft 365 E7 SKUs, they also pointed out that customer adoption is still relatively limited, with rising macroeconomic uncertainty acting as a headwind. On the positive side, the organizational changes Microsoft introduced last January to its SMB go-to-market strategy appear to be gaining traction, driving improved momentum in cloud migrations.

“We see the feedback of the call as a small positive for the MSFT investment case, but are not sure there was enough here to turn the current mixed sentiment around,” Lenschow went on to say.

That said, the reseller appeared more enthusiastic about Copilot and its trajectory than current investor sentiment suggests. The key takeaway is that Copilot is evolving beyond a basic interaction tool, similar to consumer-facing chat interfaces, into a platform designed to execute agentic workloads. Meanwhile, Copilot Cowork is expected to launch soon and should provide a clearer indication of Microsoft’s progress. As an integration layer, Copilot is already working effectively with solutions from Anthropic and other AI providers, while also drawing in Microsoft’s own products like Fabric for data.

As far as the new E7 SKU is concerned, it is not currently viewed as a significant standalone revenue driver, as it primarily represents an “all-in on MSFT” bundle. However, Lenschow notes that historically, the introduction of new SKUs has helped “elevate the momentum” in lower tiers by providing “more runway for customers on their MSFT journey.”

The partner also highlighted stronger traction in cloud migrations, which Lenschow thinks could benefit Azure as well as the broader industry, including players like Datadog. This momentum appears to be driven by two factors: clients increasingly recognizing the need to be in the cloud to fully leverage emerging AI capabilities, and improvements in Microsoft’s go-to-market execution following the organizational changes.

Bottom line, while acknowledging the mixed picture around Microsoft’s AI trajectory, Lenschow still assigns MSFT an Overweight (i.e., Buy) rating with a $600 price target, suggesting 62% upside from current levels. (To watch Lenschow’s track record, click here)

Like Lenschow, most other Street analysts take a positive stance here; based on a total mix of 34 Buys and 3 Holds, the analyst consensus rates the stock a Strong Buy. At $581.61, the average price target points toward 12-month returns of 57%. (See MSFT stock forecast)

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.