Microsoft and Oracle AI Growth Surge, Projected Spending to Reach $2.5 Trillion by 2026

Written by Emily J. Thompson, Senior Investment Analyst

MSFT+3.28%

ORCL-0.57%

Source: Fool

Updated: 1h ago

0mins

Source: Fool

Microsoft Revenue Growth: Microsoft's revenue rose 18% year-over-year in the recent quarter, primarily driven by strong demand for AI features in Microsoft 365 and the Azure enterprise AI platform, showcasing its competitiveness in the $390 billion cloud market.
Strong Cash Flow: Microsoft generated a whopping $147 billion in cash from operations over the trailing 12 months, and while aggressive spending on data center expansion may weigh on margins, this cash flow fuels necessary investments to enhance its AI capabilities.
Oracle Cloud Business Growth: Oracle's cloud infrastructure business posted an impressive 68% year-over-year revenue increase last quarter, indicating its potential to capture market share in the $159 billion cloud services market, despite this segment accounting for only 25% of total revenue.
Multicloud Solution Advantage: Oracle's multicloud offering saw an 817% year-over-year revenue growth in the recent quarter, providing flexibility that differentiates it in the competitive cloud infrastructure market, with analysts projecting a 22% annualized earnings growth over the next five years.

MSFT

$465.95+Infinity%1D

Analyst Views on MSFT

Wall Street analysts forecast MSFT stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for MSFT is 631.36 USD with a low forecast of 500.00 USD and a high forecast of 678.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.

34 Analyst Rating

32 Buy

2 Hold

0 Sell

Strong Buy

Current: 451.140

Low

500.00

Averages

631.36

High

678.00

Current: 451.140

Low

500.00

Averages

631.36

High

678.00

UBS

Buy

maintain

$650 -> $600

2026-01-23

New

Reason

UBS

Price Target

$650 -> $600

AI Analysis

2026-01-23

New

maintain

Buy

Reason

UBS lowered the firm's price target on Microsoft to $600 from $650 and keeps a Buy rating on the shares. The continued ramp of Microsoft's large Fairwater AI data centers in Atlanta and Wisconsin is emerging as a key near-term catalyst for Azure growth, with the Wisconsin site coming online in Q1, the analyst tells investors in a research note. Progress at the Wisconsin build-out supports a higher Azure growth outlook ahead of Microsoft's January 28 earnings report, UBS says.

Citi

Buy

downgrade

$690 -> $660

2026-01-21

New

Reason

Citi

Price Target

$690 -> $660

2026-01-21

New

downgrade

Buy

Reason

Citi lowered the firm's price target on Microsoft to $660 from $690 and keeps a Buy rating on the shares. Citi's reseller survey and partner data points were "more mixed" into Microsoft's fiscal Q2 results, the analyst tells investors in a research note. Citi expects an Azure beat in Q2 but reduced estimates for Microsoft's non-Azure businesses on weaker PC forecasts. The stock remains a top mega-cap idea at Citi.

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Rothschild & Co Redburn

Alex Haissl

Neutral

downgrade

$500 -> $450

2026-01-21

New

Reason

Rothschild & Co Redburn

Alex Haissl

Price Target

$500 -> $450

2026-01-21

New

downgrade

Neutral

Reason

Rothschild & Co Redburn analyst Alex Haissl lowered the firm's price target on Microsoft to $450 from $500 and keeps a Neutral rating on the shares.

Mizuho

Outperform

NULL

downgrade

$640 -> $620

2026-01-21

New

Reason

Mizuho

Price Target

$640 -> $620

2026-01-21

New

downgrade

Outperform

NULL

Reason

Mizuho lowered the firm's price target on Microsoft to $620 from $640 and keeps an Outperform rating on the shares. The firm adjusted targets in large-cap software as part of a Q4 earnings preview. Channel checks were solid overall, with public cloud data points were "generally good" and AI adoption "very strong," the analyst tells investors in a research note. However, Mizuho says some of its checks noted more moderate budget flush activity than usual. In addition, growing investor concerns about AI disruption :continue to decimate many software company multiples," the firm contends. It cites recent multiple compression for the target cuts.

About MSFT

Microsoft Corporation is a technology company that develops and supports software, services, devices, and solutions. Its Productivity and Business Processes segment consists of products and services in its portfolio of productivity, communication, and information services, spanning a variety of devices and platforms. It comprises Microsoft 365 Commercial products and cloud services; Microsoft 365 Consumer products and cloud services; LinkedIn, and Dynamics products and cloud services. The Intelligent Cloud segment consists of its public, private, and hybrid server products and cloud services. It comprises server products and cloud services, including Azure, and enterprise and partner services, including Enterprise Support Services. Its More Personal Computing segment primarily comprises Windows and Devices, including Windows OEM licensing; Gaming, including Xbox hardware and Xbox content; Search and news advertising, comprising Bing and Copilot, Microsoft News, and Microsoft Edge.

About the author

Emily J. Thompson

Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.