Following recent meetings with investors, UBS stated that Microsoft's (MSFT.US) 365 and Copilot products require an improved market outlook to drive the tech giant's stock price higher. Analyst Karl Keirstead wrote in a report to clients, "We maintain a Buy rating on Microsoft, currently based on a 19x multiple of its fiscal 2026 non-GAAP earnings per share. However, we also acknowledge that for the stock to achieve a higher valuation, the market outlook surrounding M365/Copilot needs to improve." Consequently, Keirstead reduced the price target from $600 to $510.

Keirstead explained that recent moves by OpenAI and Anthropic into knowledge work directly target Microsoft's key offerings, but investor focus has shifted to the sustainability of the 365 and Copilot businesses and the growth they can generate. After meeting with Microsoft's investor relations team, Keirstead noted that the Windows giant indicated a rebound in usage metrics and user numbers in its second fiscal quarter.

Notably, Keirstead added that recent initiatives, such as Copilot for Microsoft 365, the new E7 suite, and leadership changes, "suggest a more aggressive posture internally at Microsoft and demonstrate a sense of urgency." Keirstead explained that beyond Office 365 and Copilot, Microsoft "sounded very upbeat on Azure demand," but did not provide updates on revenue growth or capacity increases beyond what had already been communicated to investors.