Fearless in the face of recent low stock prices, KeyBanc says that the rebound in IT budgets is expected to boost Microsoft Corporation's (MSFT.US) cloud and AI business, giving it a "buy" rating.

Despite the recent lackluster performance of the stock price in the past few months, Microsoft Corporation (MSFT.US) is expected to benefit again this year as IT spending rebounds. According to the latest channel survey by KeyBanc Capital Markets, customer IT budget growth is accelerating, which is positive for the software and cloud computing sectors, especially for Microsoft Corporation. KeyBanc's survey of IT distributors and solution integrators found that customer budgets are expected to grow by 5.3% in 2026, further accelerating from 4.6% in 2025. The research indicates that spending on cloud computing and artificial intelligence will be the main drivers of growth, with Microsoft Corporation's Azure cloud services and Copilot AI products receiving the most attention. KeyBanc analyst Eric Heath wrote in a research report, "30% of respondents expect further acceleration in customer spending on public cloud, up 17 percentage points from the third quarter, which will provide a tailwind for Azure beyond the GPU level." He also added that multiple Copilot products are gaining more attention, with an increasing number of customers entering the pilot or deployment phase. KeyBanc currently rates Microsoft Corporation as "Overweight" with a target price of $630. However, short-term market sentiment remains cautious. Microsoft Corporation's stock price fell 2.4% on Wednesday, closing at $459.53, its lowest level since late May last year. The market remains on the sidelines for software stocks as a whole and companies closely related to OpenAI, which has been one of the drag factors. Meanwhile, Goldman Sachs Group, Inc. recently raised the target price for Microsoft Corporation to $655, citing Microsoft Corporation's investment in Anthropic and development of its own AI models, which to some extent reduces its dependence on OpenAI and makes its AI layout more diverse. The market is still focused on a key issue: the speed of implementation of AI tools. Last month, tech media reported that Microsoft Corporation had relaxed sales quotas for enterprise AI products (such as Microsoft 365 Copilot), causing the stock price to fall; Microsoft Corporation later clarified to the media that overall sales quotas for AI products had not been reduced. Heath pointed out that customer attitudes towards generative AI are steadily advancing, but the pace is still cautious: "There are still more respondents indicating that customers are in the 'experiment/pilot' stage, and the proportion who have truly entered production-level deployment remains in the low to mid-single digits."