Bank of America has raised its price target on Microsoft to $600 from $500 and reaffirmed its Buy rating, as analyst Tal Liani said the stock may be ready to break out after a year of muted performance.

The new target implies about 19% upside from Tuesday’s closing price of $502.43, when Microsoft shares fell 1% for the session. Year to date, MSFT has risen 4.2%, while its trailing 12-month return shows a decline of 0.5%. Over the same period, the S&P 500 has gained roughly 12%, leaving Microsoft well behind the broader market, even as investors continue to weigh how much of the company’s spending on cloud and AI infrastructure is already reflected in the share price.

Liani said the company’s latest financial metrics justify a higher valuation. His view is based primarily on the strength of Azure, Microsoft’s cloud infrastructure platform. Azure grew 43% in fiscal Q4 2026, which ended June 30, accelerating from 39% growth in the prior quarter. Microsoft has guided for 45% Azure growth in fiscal Q1 2027, pointing to continued momentum.

Copilot is also becoming a larger contributor. Paid Microsoft 365 Copilot seats have surpassed 30 million, and net additions more than doubled from the previous quarter. Remaining performance obligations rose 84% year over year, suggesting a strong pipeline of future revenue.

BofA’s new valuation uses a 28x multiple on its calendar year 2027 earnings estimate, up from 24x previously. The firm said the change reflects faster cloud expansion and greater visibility into returns from Microsoft’s artificial intelligence infrastructure spending.

Liani also pointed to Microsoft’s strategy of using multiple AI models so enterprise customers can choose the most cost-effective option for different workloads.

“Not every workload requires a complex and expensive frontier model, and Microsoft’s approach helps optimize performance while reducing token consumption,” he wrote.

Morgan Stanley analyst Adam Wood has expressed a similar view. He kept his own $600 price target after Microsoft’s late-July fiscal Q4 results, saying the company’s “growth thesis” is “taking shape.” Wood noted that Microsoft held margins steady despite rising AI-related spending, even as capital expenditures reached about $41 billion in the quarter and $145 billion for the full fiscal year.

Wall Street sentiment remains broadly positive. Among 60 firms tracked by FactSet, Microsoft carries an average Buy recommendation and a mean price target of $565.88. BofA’s $600 target is now among the more optimistic forecasts.

InvestingPro data shows that 17 analysts have recently raised earnings estimates for upcoming periods. The stock currently trades at a price-to-earnings ratio of 28.5 and a PEG ratio of 0.89, which InvestingPro describes as undervalued relative to growth expectations.

Meta Platforms has become a major Azure customer, spending hundreds of millions of dollars annually on the platform. Moody’s recently reaffirmed Microsoft’s Aaa credit rating and kept its outlook stable.