Wall Street investment bank Morgan Stanley (MS) has named Microsoft (MSFT) its “Top Pick” among large-cap software stocks heading into 2026.
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Keith Weiss, a top five-star rated analyst, said in a note that Microsoft is likely to benefit in the new year from robust demand across its various business lines and strong operating margin expansion. His conviction on MSFT stock comes after he personally met with Microsoft executives.
Weiss said he left the meeting with Microsoft feeling “conviction on robust demand translating to durable mid-teens top-line growth and increased confidence in ROI contributing to continued operating margin expansion.” The analyst now sees high-teens earnings per share (EPS) growth that is not currently reflected in Microsoft’s share price.
Microsoft’s Cloud Computing Unit
The Morgan Stanley analyst also highlights Microsoft’s Azure cloud computing unit as a key driver of future growth at the technology giant. Weiss said Azure’s artificial intelligence (AI) gross margins could already be around 20%, with potential to reach 30% by 2029.
Microsoft’s cloud computing growth implies “very significant levels of upside to our model in the coming years,” wrote Weiss in his note about the Seattle-based tech company. Morgan Stanley also sees strong future returns on AI investments at Microsoft. Weiss concludes that MSFT stock is “underpriced, keeping Microsoft our Top Pick in large-cap software.”
Is MSFT Stock a Buy?
Microsoft’s stock has a consensus Strong Buy rating among 34 Wall Street analysts. That rating is based on 32 Buy and two Hold recommendations issued in the last three months. The average price target on MSFT stock of $632.22 implies 32.76% upside from current levels.
