Microsoft’s AI strategy gains traction with growing Copilot adoption and Azure growth

BNP Paribas analyst reports clear signs of progress in Microsoft’s AI push, with improved Copilot engagement and accelerating Azure growth prompting upbeat outlooks and further upside expectations.

Microsoft is beginning to show clearer progress in its artificial intelligence push, with BNP Paribas analyst Stefan Slowinski saying adoption of Copilot is improving, Azure growth is picking up and investor concern over OpenAI has eased. He kept an Outperform-equivalent rating on the stock and set a price target of $555, implying further upside from the share price cited in his note.

According to Slowinski, Microsoft is now delivering more convincingly on the parts of its AI strategy that had previously drawn scepticism, particularly around whether Copilot could win meaningful traction with enterprise customers. He said the company has started widening access to features such as Agent Mode after earlier roll-outs were slowed by enterprise deployment timing and staged general-availability launches, and argued that Microsoft’s scale inside Microsoft 365 gives it a major distribution advantage as those tools become easier to use.

The analyst also pointed to better engagement trends, saying sentiment around Copilot has improved and usage in Word, Excel and PowerPoint continues to rise. Microsoft has separately highlighted stronger month-on-month engagement and retention, while BNP Paribas now expects Copilot seats to exceed 25 million by the end of fiscal 2026, more than 10 million above the level seen two quarters earlier. That said, recent reporting has suggested the paid base remains relatively small compared with Microsoft’s vast user pool, with one estimate putting paying Copilot users at only 3.3 per cent of Microsoft 365 and Office 365 users who interact with Copilot Chat.

Azure remains the other major pillar of the story. Slowinski said BNP Paribas is still modelling growth above 40 per cent over the next several quarters as Microsoft brings more AI infrastructure on line, including the Fairwater Wisconsin site and the near-full-scale deployment of Fairwater Atlanta. He also said concerns around OpenAI have become less acute after changes to the companies’ agreement removed worries tied to artificial general intelligence, and after OpenAI’s reported funding round, which he said should help meet more than $250 billion in Azure commitments. Some analysts have still questioned the transparency of Microsoft’s financial relationship with OpenAI, but the broader market view is that Microsoft’s early lead across Windows, Office and Azure gives it strategic advantages even as the AI race becomes more crowded.

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Source: Fuse Wire Services