Morgan Stanley's Top Software Pick for 2026 is a Great Value Buy

Core Viewpoint - Microsoft is positioned as a leading player in the AI revolution, with significant potential for growth and monetization in 2026, despite current challenges [2][4]. Group 1: Stock Performance and Market Position - Microsoft shares are currently down approximately 12% from last year's peak of over $542 per share, indicating a potential buying opportunity as the stock is viewed as less deserving of this decline [3]. - Morgan Stanley has set a price target of $650 for Microsoft, suggesting an upside of over 35% from current levels, highlighting its status as a blue-chip investment [4]. Group 2: AI and Azure Growth Potential - Azure is identified as a strong growth driver for Microsoft, with potential for margin gains that could lead to significant earnings growth as AI adoption increases [5]. - The partnership with OpenAI and the robust performance of Azure are seen as key factors that could drive Microsoft's success in the AI sector [7]. Group 3: Copilot and Consumer Engagement - Microsoft’s Copilot has room for improvement and expansion across various platforms, including GitHub, Windows, Office, and Xbox, which could enhance customer satisfaction and willingness to pay [6]. - The introduction of a more personable Copilot, featuring the Mico avatar, and improvements in the Edge browser are expected to create new growth opportunities in the consumer market [9].