Citigroup and other investment banks cut their Microsoft target price, with AI spending pressure becoming the focus

BlockBeats message, July 16: Citi lowered its target price for Microsoft, citing that the company’s AI investment is creating greater pressure on near-term free cash flow and profit margins, while still maintaining a Buy rating.

Citi lowered its Microsoft target price from $620 to $570. The firm believes Microsoft remains one of the clearest companies for the monetization of AI software and cloud computing, but the capital expenditure pace for Azure data center buildouts, GPU procurement, and AI infrastructure expansion may continue to weigh on investors’ expectations for cash flow over the coming quarters.

The firm still believes that Copilot, Azure AI services, and enterprise customer migrations will support long-term revenue growth. The main disagreement is the timeline: the market previously preferred to price in AI revenue upfront, but now it is starting to demand proof that these spending plans can translate into profits faster.

Mizuho and Wells Fargo have recently also lowered their Microsoft target prices, but maintained positive ratings. The common view among multiple institutions is that Microsoft’s AI assets remain attractive, but the stock price in the short term needs to digest pressures from high capital expenditures, the reshaping of traditional software business by AI, and a reassessment of Azure growth expectations.