Citi raised its Microsoft Copilot adoption estimates Wednesday, projecting M365 Copilot net adds of 8 million in fiscal Q4 and forecasting accelerating revenue and EPS growth through fiscal 2030, even as it trimmed its price target to $570 from $620.
Citi analysts issued a bullish note on Microsoft's Copilot artificial intelligence assistant Wednesday, raising their adoption estimates and projecting accelerating revenue and earnings growth through fiscal 2030 — a view that surprised at least one prominent market commentator.
In the note to clients, Citi said industry checks revealed stronger Copilot adoption momentum and improving customer feedback, particularly as more advanced features from the "IQ offering" begin to integrate into the Copilot suite.
"We picked up notable stronger Copilot adoption momentum and improving feedback from customers as more advanced IQ offering starts to work into the Copilot suite," the analysts wrote.
As a result, Citi revised its estimates upward, projecting Microsoft 365 Copilot net additions of 8 million in fiscal Q4, up from 5 million in Q3. The analysts said they expect a strong fiscal 2026 fourth quarter, with momentum carrying into fiscal 2027 from both Copilot and the Azure cloud platform.
Citi maintained its buy rating on Microsoft but cut its price target to $570 from $620, citing multiple compression in enterprise software.
Jim Cramer said on CNBC that the Citi note caught him off guard, describing the analysts as having "an against-the-grain view" on Copilot. "Reading the note was like reading a page out of 'Alice in Wonderland,'" Cramer said, adding that the optimism ran contrary to what he had been hearing about Copilot's performance. He said he was, however, pleased to see the analysts' positive commentary on Azure.
Microsoft shares rose more than 3% on Wednesday, extending month-to-date gains to 6%. Despite that recent bounce, the stock remains down 18% year to date, sharply underperforming the S&P 500's advance of more than 10% over the same period. Shares are also down approximately 27% from their record close of just over $542 in late October 2025.
The broader enterprise software sector has faced persistent pressure in 2026 on concerns that AI tools are displacing traditional software spending. Salesforce, another large-cap enterprise software name, has fallen 36% year to date. IBM's stock dropped 25% in a single session Tuesday after the company preannounced difficulties in its software business.
Those concerns were amplified by a report last week that Starbucks is exploring ways to reduce the $400 million it pays Microsoft and IBM annually for software tools, with plans to replace them using in-house applications built with AI assistance.
Microsoft is also navigating questions about its reliance on OpenAI for Azure growth and whether capacity constraints have limited the cloud platform's expansion. Microsoft, Amazon, and Alphabet have collectively committed roughly $575 billion this year to AI infrastructure investment, leaving little room for execution shortfalls, analysts say.
Microsoft is scheduled to report fiscal fourth-quarter earnings after the market close on July 29, when the company's Copilot trajectory and Azure performance will face close scrutiny from investors watching for signs that the AI spending wave is translating into measurable revenue growth.
Jay Goldberg is a staff writer at TechEchelon covering technology, markets, and policy. He files the breaking news and deal coverage that move the publication's core desks.
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