Why Evercore's $515 Target on Microsoft Signals AI Dominance—and Why Now Is the Time to Buy

Microsoft's stock has long been a staple of growth portfolios, but its current trajectory is anything but ordinary. Evercore ISI's recent upgrade to an Outperform rating and a $515 price target—a 14% upside from current levels—reflects a seismic shift in investor sentiment. The catalyst? Microsoft's unmatched AI infrastructure, accelerating Copilot adoption, and a widening moat against rivals like Crusoe. Let's dissect why this is a buy signal investors cannot afford to ignore.

Azure's AI Infrastructure: The Engine of a $110 Billion Opportunity

Evercore's report underscores Azure's role as the backbone of Microsoft's AI ambitions. Azure's revenue surged 33% year-over-year (35% in constant currency) in Q4 2025, driven by soaring demand for AI services. The cloud division isn't just keeping pace—it's leading a generational shift. By 2028, Evercore estimates the AI market alone could hit $110 billion, with Azure positioned to capture a disproportionate share.

Why? Azure isn't just a data center provider; it's an AI ecosystem. Its integration with Copilot (Office, Teams, GitHub) creates a self-reinforcing loop: more users = more data = better AI models = more enterprise adoption. Competitors like AWS and Google lag in this vertical integration, while Crusoe's $11.6 billion data center funding—meant to reduce OpenAI's Azure reliance—faces an uphill battle. Microsoft's $42.4 billion Microsoft Cloud revenue (up 20% in constant currency) speaks to its scale.

Copilot's Viral Adoption: Free Access Drives Explosive Growth

Evercore's analysis highlights a critical inflection point: free access to Copilot Chat is turbocharging user growth. Microsoft's decision to offer the tool at no cost to Teams users has already driven adoption rates far beyond expectations. Enterprise customers—from banks to healthcare providers—are embedding Copilot into workflows, citing its “differentiator” status compared to rivals like Salesforce or Slack.

The ripple effect? Partners like Accenture and Deloitte are building AI solutions atop Azure and Copilot, creating a flywheel of developer and enterprise lock-in. Crucially, Copilot isn't just a productivity tool—it's a gateway to Azure's AI services. As one C-suite executive told Evercore: “Copilot is the Trojan horse. Once it's in the door, Azure becomes the default.”

Underappreciated Security Moats: Microsoft's AI-Driven Defense

Microsoft's cybersecurity moats often fly under the radar, but they're a critical competitive advantage. Its recent legal action targeting 400,000 infected devices linked to the Lumma Stealer malware—a move only possible due to Azure's scale and AI-powered threat detection—demonstrates how Microsoft's ecosystem creates a security edge.

This isn't just PR; it's a defensible advantage. Competitors lack Microsoft's blend of cloud, endpoint security, and AI-driven threat intelligence. Even as Crusoe expands data centers, it can't replicate the trust Microsoft builds through products like Windows Defender and Azure Sentinel.

Valuation: A 32.5x Multiple on 2026 Growth

Evercore's $515 target assumes a 32.5x multiple of fiscal 2026 EPS, a premium reflecting Microsoft's AI-led growth. While the current P/E of 34.8x may seem high, it's justified by Azure's 30%+ revenue growth and Copilot's scalability. GuruFocus's $500.36 “fair value” estimate aligns with this thesis, implying a 10%+ upside.

Risks? Yes. But Manageable for Long-Term Gains

Skeptics will point to near-term headwinds: declining on-premises server sales, AI capacity constraints, and macroeconomic uncertainty. But these are noise against the $110B AI opportunity. Even Crusoe's data center push is a testament to Azure's dominance—not a threat—since it forces rivals to spend billions just to keep pace.

The Bottom Line: Act Now Before the Upside Evaporates

Microsoft isn't just a cloud leader—it's the AI leader, and the stock is pricing in only part of its potential. With $9.7 billion returned to shareholders in Q4 alone, a robust balance sheet, and a 14% upside to Evercore's target, the risk-reward here is skewed in investors' favor.

The market is waking up to Microsoft's AI supremacy. Don't miss the boat: buy Microsoft now at under $450, and ride the wave to $515—and beyond.