The current bull market has been dominated by just a handful of megacap tech stocks. These massive tech companies have been the driving force behind the most significant advancements in artificial intelligence (AI) in recent history, providing key infrastructure for developers, developing large language models, and using AI to drive significant revenue growth for key products and business segments.
While many of the largest companies have seen their stock prices continue to climb in 2026, a few haven’t kept up with the rest of the market. That’s creating buying opportunities for some, and analysts see one of 2026’s laggards climbing more than 30% over the next year.
With a median analyst price target of $550, Wall Street sees the most upside for Microsoft (MSFT 0.75%) over the next 12 months among megacap stocks.
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Microsoft is an undervalued AI leader
Microsoft’s early and ongoing investments in AI have more than paid off for the business. It was an early investor in OpenAI, positioning its Azure cloud computing business as the top choice among AI developers looking to gain access to the leading AI lab’s models.
While it no longer has an exclusive relationship with OpenAI, it still holds a 27% stake in the company, providing significant exposure to the leading AI lab. What’s more, the momentum at Azure remains intact, and it’s investing heavily to maintain it.
Azure revenue climbed 40% in Microsoft’s most recent quarter, driven by both AI and non-AI services. However, capital expenditures climbed 46% year over year, and management guided for a significant step up in spending through the rest of the year. Its calendar 2026 capex budget now sits at $190 billion.
That massive spending has put pressure on the stock price. But Microsoft has consistently shown strong returns on its invested capital that should provide confidence in the spending plans. Plus, Microsoft faces the challenging task of determining the proper allocation of its resources for its own AI training and inference needs or for renting compute capacity to Azure customers. The former trades Azure revenue growth for potential revenue growth from its Microsoft 365 productivity software suite later on.
Today’s Change
(-0.75%) $-3.13
Current Price
$414.29
Key Data Points
Market Cap
$3.1T
Day’s Range
$411.37 – $416.05
52wk Range
$356.28 – $555.45
Volume
477K
Avg Vol
34M
Gross Margin
68.31%
Dividend Yield
0.63%
To that end, Microsoft 365 is showing good momentum in and of itself. Commercial software sales climbed 19% year over year, and the Consumer version generated 33% more revenue than a year ago. Microsoft 365 Copilot seat additions climbed 250% year over year, its fastest growth since launching the product. It now counts over 20 million users. But there’s still a ton of growth potential, with over 450 million total Microsoft 365 Commercial users.
The strong revenue growth led to earnings-per-share growth of 21% in the quarter. Despite the excellent outlook for its two main businesses, though, shares trade for about 25 times forward earnings expectations. It’s no wonder analysts see the stock price moving higher over the next year.
As Microsoft shows strong returns on its capital expenditures and continued earnings growth, the stock should climb to meet analysts’ expectations. Even if it doesn’t climb 30% in the next year, shares look like a great value for long-term investors.
