11:03 AM EDT, 07/09/2025 (MT Newswires) -- Microsoft's ( MSFT ) artificial intelligence business potential is being underestimated by the market, according to Oppenheimer, which believes the tech giant is in a position to continue to grow its AI revenue streams.

In a client note emailed Wednesday, the brokerage said it believes that robust growth in Microsoft's ( MSFT ) AI business, as well as a potential reacceleration in the company's cloud-computing platform Azure's growth in fiscal 2026, hasn't been fully reflected in the stock.

"Investors are underestimating the potential for Microsoft's ( MSFT ) AI business to drive durable consumption growth for Azure and scale fast in the agentic AI era given how underwhelming the value proposition and use cases for Copilot proved," Oppenheimer analysts, including Brian Schwartz, wrote in the note.

Oppenheimer expects investor attention on the tech behemoth's AI revenue stream to increase as Azure's growth remains strong. This will provide valuation support to Microsoft ( MSFT ) similar to how the Amazon Web Services cloud platform contributes to the valuation of Amazon.com (AMZN), according to the brokerage.

Oppenheimer upgraded Microsoft's ( MSFT ) stock to outperform from perform with a price target of $600. Shares of the company have climbed 20% so far this year and were up 1.1% in Wednesday trade.

Oppenheimer believes the company is strategically positioned as an AI supplier in software with a clear path to reaccelerate commercial bookings and Azure growth. It expects growth acceleration to be driven by increasing adoption and monetization of the company's Copilot generative AI chatbot, as well as pricing, among other factors.

Under Oppenheimer's coverage, Microsoft ( MSFT ) is the "most leveraged" to the next wave of modernization and expansion of cloud and AI applications, while many of its IT competitors are likely to see erosions in competitive positioning and market share, according to the report.

Additionally, Microsoft ( MSFT ) has strong margin and per-share earnings growth drivers from recent workforce reductions, AI efficiencies on operating costs, and larger buybacks, Oppenheimer said in the note. Recently, the company reportedly launched a new wave of layoffs that will impact 4% of its workforce, or 9,000 employees.

The brokerage highlighted some AI cycle risks to Microsoft ( MSFT ), such as a decline in adoption rates that could lead to more constrained deployments and a substantial slowdown in spending growth for the company's AI technology. "This development would impact the usage and financials outcome for Azure," Schwartz said.

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