Citi and other investment banks cut Microsoft's price target, with AI spending pressure becoming a key focus.

Citigroup has cut Microsoft’s target price, citing the company’s AI investments are putting greater pressure on short-term free cash flow and profit margins, while maintaining a Buy rating. The bank lowered Microsoft’s target price from $620 to $570. It noted that Microsoft remains one of the clearest players in the commercialization of AI software and cloud computing, but the pace of capital expenditure on Azure data center construction, GPU procurement, and AI infrastructure expansion may continue to weigh on investors’ cash flow expectations in the coming quarters. The bank still believes Copilot, Azure AI services, and enterprise customer migrations will underpin long-term revenue growth. The main point of divergence lies in the timeline: the market was previously willing to price in AI earnings in advance, but is now starting to demand that Microsoft prove these expenditures can translate into profits faster. Mizuho and Wells Fargo have also recently cut Microsoft’s target prices, while maintaining positive ratings. The shared view among multiple institutions is that Microsoft’s AI assets remain attractive, but its stock price needs to digest near-term pressures from high capital expenditure, the AI-driven reshaping of its traditional software business, and a reassessment of Azure’s growth expectations.