Citi Predicts Microsoft's Stock to Rise Nearly 20% After a Strong Earnings Report

Microsoft appears ready to extend its impressive performance into the rest of 2025, according to a new report from Citi. The investment bank has raised its price target on the tech giant’s stock from $480 to $540 per share, suggesting a potential gain of 19% from where the stock closed on Wednesday. Citi also reaffirmed its buy rating on Microsoft, signaling continued confidence in the company’s outlook.

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So far this year, Microsoft shares have already climbed 7%, and Citi analyst Tyler Radke believes there’s room for further growth. He pointed to the company’s strong quarterly results, noting both a solid earnings and revenue beat. Radke also emphasized Microsoft's ability to manage costs efficiently and highlighted an improving performance from its Azure cloud computing division.

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In a move aimed at streamlining operations, Microsoft recently announced plans to lay off around 6,000 employees—roughly 3% of its global workforce. Radke viewed this decision as a favorable one for the company’s stock, estimating that the job cuts could lead to over $1 billion in net savings by fiscal year 2026. These savings could help balance out rising costs related to depreciation and capital expenditures.

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“We see this as a sign of disciplined operational management,” Radke commented. He also noted that while some of the savings will likely help cushion expenses, a portion will probably be reinvested in research and development.

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Specifically, he said these R&D investments will focus on Microsoft’s highest-priority initiatives, particularly within its growing artificial intelligence portfolio.

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Radke further explained that Citi is revising its growth forecasts upward, restoring projections to levels seen before the tariff-related uncertainty earlier this year. The analyst believes that Microsoft is well-shielded from broader market fluctuations, thanks to its dominant position in generative AI for enterprise customers. With recent signs that tariff tensions may be easing, and with Microsoft posting resilient third-quarter results, the firm feels more optimistic about the company’s future prospects.

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One of the key updates in Citi’s revised outlook is a return to a growth trajectory of over 30% for Microsoft’s Azure platform as the company heads into fiscal year 2026. This upward adjustment signals confidence in Azure's role as a major driver of the company’s overall performance.

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Across Wall Street, sentiment around Microsoft remains broadly positive. According to data from LSEG (formerly Refinitiv), 56 of the 63 analysts covering Microsoft rate the stock as a “buy” or “strong buy.” The average analyst price target implies an expected upside of approximately 11% from current levels, reinforcing the widespread bullish view on the stock.

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Microsoft's strategy appears focused on balancing efficiency with innovation. While the company is tightening operations by reducing headcount, it is also maintaining a strong emphasis on investing in areas that are expected to shape its long-term future—chief among them artificial intelligence. This dual focus allows the company to both optimize costs and remain at the forefront of cutting-edge technology.

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The tech giant’s AI efforts have become a central part of its narrative, particularly in how they’re integrated into cloud services, enterprise solutions, and development tools. Microsoft’s alignment with enterprise customers, especially in delivering advanced AI capabilities, is a major reason why many analysts believe it has a competitive edge over peers.

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Additionally, Microsoft’s ability to continue delivering solid financial results—despite macroeconomic uncertainties and shifts in global trade policies—has impressed investors. The company's operational discipline, combined with its aggressive investment in high-growth sectors like AI, continues to support a long-term growth story that appeals to both institutional and retail investors alike.

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As Microsoft prepares to enter the second half of 2025, the consensus view is that it remains one of the most compelling plays in the large-cap tech space. With strong fundamentals, growing AI dominance, and a robust cloud business, the company appears well-positioned to maintain its momentum and potentially deliver even greater returns in the months ahead.

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