Despite a sluggish stock performance in recent months, Microsoft (MSFT.US) stands to benefit anew this year against a backdrop of recovering IT expenditures. A recent channel survey by KeyBanc Capital Markets indicates that growth in customer IT budgets is accelerating, which bodes well for the software and cloud computing sector, particularly Microsoft. The survey of IT distributors and solution integrators found that customer budgets are projected to grow by 5.3% in 2026, a further acceleration from the 4.6% growth anticipated for 2025. The research points out that spending related to cloud computing and artificial intelligence will be the primary drivers of this growth, with Microsoft'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 the growth rate of customer spending on public cloud to increase further, up 17 percentage points from the third quarter, which will provide Azure with tailwinds beyond just the GPU level." He also added that multiple Copilot products are garnering increased attention, with a growing number of customers moving into pilot or formal deployment phases. KeyBanc currently assigns Microsoft an "Overweight" rating and has set a price target of $630. However, short-term market sentiment remains cautious. Microsoft's stock fell 2.4% on Wednesday, closing at $459.53, its lowest level since late May of last year. A wait-and-see attitude towards software stocks in general, and towards companies with close ties to OpenAI, is cited as one of the drag factors. Meanwhile, Goldman Sachs Group recently raised its price target for Microsoft to $655, citing the company's partial diversification away from reliance on OpenAI through investments in Anthropic and the development of its own AI models, resulting in a more diversified AI strategy. The market continues to focus on a core issue: the pace of adoption for AI tools. Last month, tech media reports that Microsoft had relaxed sales quotas for enterprise AI products, such as Microsoft 365 Copilot, triggered a stock decline; Microsoft subsequently clarified to media that overall sales quotas for AI products had not been reduced. Heath noted that, based on the survey results, customer attitudes towards generative AI are steadily progressing, but the pace remains cautious: "There is a consistent increase in respondents indicating customers are in an 'experimentation/pilot' phase, while the proportion that has moved into production-level deployment remains in the low to mid-single-digit range."
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