Citi Cuts Microsoft Price Target on AI Spending, Maintains Buy

Citi Research lowered its price target on Microsoft (MSFT) to $480 from $500, according to a report from Barrons.com. Despite the cut, Citi maintained its Buy rating, noting that higher AI spending in fiscal 2027 may temporarily impact profitability but bolsters long-term growth.

Rating Change

• Previous Rating: Buy with a $500 target.
• Current Rating: Buy with a $480 target (4% decrease).

Analyst Rationale

The analyst at Citi expects Microsoft to increase spending on AI infrastructure in fiscal 2027, which could pressure profit margins in the near term. However, these investments are seen as necessary to maintain leadership in AI, supporting future revenue growth.

Context

Microsoft shares are currently trading around $440, up 25% over the past year. Other analysts, such as those at Morgan Stanley and Goldman Sachs, have maintained Buy ratings with targets ranging from $490 to $510. Recent stock performance has been supported by growth in Azure and Copilot.

What to Make of This

Despite the price target cut, the overall outlook for Microsoft remains positive. Investors should monitor capital expenditure guidance in upcoming reports, as increased AI investment may affect quarterly earnings but enhances competitive positioning.