TLDR
- Morgan Stanley’s Q3 2025 CIO survey shows 33% of CIOs expect Microsoft to capture the largest share of GenAI spending in 2025, more than double the next competitor
- Microsoft leads as the top IT wallet share gainer with a net +42% of CIOs expecting share gains, up from +41% in the previous survey
- Azure is expected to be the fastest-growing hyperscaler in 2025 according to CIOs surveyed
- Morgan Stanley maintains an Overweight rating on MSFT and names it their “Top Pick in large-cap software” with valuation at a discount to peers
- Microsoft stock fell 1.05% on Thursday despite the positive analyst report, with shares declining in afternoon trading
Microsoft stock closed down 1.05% in Thursday afternoon trading. The drop came despite glowing results from Morgan Stanley’s latest CIO survey.
The disconnect between analyst enthusiasm and market reaction created an unusual situation. Good news didn’t translate to gains for investors holding MSFT shares.
Morgan Stanley’s third quarter 2025 CIO survey delivered strong results for Microsoft. The investment bank found that 33% of chief information officers expect Microsoft to capture the largest share of GenAI spending in 2025.
That figure is more than double the next closest competitor. The gap shows Microsoft’s commanding position in the race for AI budgets.
Looking three years out, the picture gets even better for Microsoft. 37% of CIOs expect the company to gain the largest incremental share of GenAI spending over that timeframe.
Microsoft Leading IT Budget Gains
The survey revealed Microsoft remains the top IT wallet share gainer. A net 42% of CIOs expect Microsoft to gain share, up slightly from 41% in the previous survey.
Morgan Stanley attributed this to Microsoft’s alignment with key technology priorities. The bank pointed to the company’s deep integrations across the software ecosystem.
Microsoft’s vast portfolio of products gives it multiple ways to monetize generative AI. The company also continues making large infrastructure investments to support AI workloads.
Azure continues to lead among public cloud platforms. CIOs expect it to be the fastest-growing hyperscaler in 2025 according to the survey results.
Corporate technology budgets are shifting toward AI, digital transformation, and cloud computing. Microsoft has positioned itself to capture a large portion of those spending increases.
The Morgan Stanley analysts maintained their Overweight rating on Microsoft stock. They called MSFT their “Top Pick in large-cap software.”
Valuation Still Attractive
Interestingly, Morgan Stanley noted that Microsoft’s valuation trades at a discount to peer companies. This comes despite its leading position in growth areas like AI and cloud.
The bank said Microsoft’s scale and ecosystem create higher lifetime value. These advantages should lead to stronger economics over the long run.
Wall Street analysts broadly agree with Morgan Stanley’s positive view. Microsoft has a Strong Buy consensus rating based on 33 Buy ratings and one Hold rating assigned in the past three months.
The average price target sits at $629.22 per share. That implies 21.23% upside from current levels.
Microsoft shares have rallied 26.21% over the past year. Thursday’s decline went against that longer-term trend.
The company recently announced new games coming to Xbox Game Pass in October. Supermarket Simulator and The Casting of Frank Stone will arrive this month.
Evil West and Ninja Gaiden 4 will close out October’s lineup. Some games will also leave the platform, including Cocoon, Core Keeper, and Teenage Mutant Ninja Turtles: Mutants Unleashed.
Morgan Stanley’s survey covered responses from chief information officers about their spending plans and priorities. The results showed continued momentum for Microsoft across multiple product categories and customer segments.
