TLDR
- IT budgets projected to grow 5.3% in 2026, up from 4.6% in 2025, based on KeyBanc reseller survey
- Morgan Stanley survey shows 92% of CIOs plan to use Microsoft’s generative AI products within the next year
- Azure maintains dominant position with 53% of application workloads among surveyed CIOs
- Microsoft 365 Copilot adoption climbing to 80% of CIOs planning to use it in the next year
- KeyBanc maintains $630 price target and Morgan Stanley names Microsoft a Top Pick despite recent 8% stock decline
Microsoft stock may be down 8% over three months, but fresh survey data paints a different picture for 2026. Two separate research reports show growing IT budgets and accelerating artificial intelligence adoption across enterprise customers.
KeyBanc Capital Markets surveyed resellers who purchase IT products and bundle them with services. The findings reveal customer budgets will expand 5.3% this year. That compares to 4.6% growth in 2025.
Public cloud spending appears ready to accelerate. The survey found 30% of respondents expect faster customer spending growth on public cloud services. That number jumped 17 percentage points from the third quarter reading.
KeyBanc analyst Eric Heath notes Azure stands to benefit from this trend beyond graphics processing units alone. Multiple Copilot products are gaining real traction with customers moving from pilot programs into production environments.
Azure Dominates Application Workloads
Morgan Stanley’s fourth quarter CIO survey reinforces the bullish thesis. Software budgets should grow 3.8% in 2026, edging up from 3.7% last year.
Microsoft leads as the top share gainer of IT spending dollars. This holds true for both one-year and three-year forecasts among surveyed technology executives.
Azure currently hosts 53% of application workloads according to the CIO respondents. That leadership position looks secure over the next three years based on spending intentions.
Azure AI ranks as a key priority for technology decision makers. 37% of CIOs expect to deploy Azure OpenAI Services within 12 months. Another 42% plan to implement GitHub Copilot.
Copilot Adoption Reaches New Highs
Microsoft 365 Copilot continues its steady climb. 80% of CIOs now plan to use the productivity tool within the next year. Morgan Stanley tracked five consecutive quarterly increases in adoption plans.
CIOs project Copilot will reach 61% penetration among their employees over a three-year period.
The generative AI market remains nearly saturated with Microsoft products. 92% of CIOs expect to use Microsoft’s AI tools in the next year. That figure dipped slightly from 95% a year earlier but still represents near-universal coverage.
Morgan Stanley analyst Keith Weiss says Microsoft “remains in pole position to garner increasing IT Wallet share as GenAI adoption ramps and cloud migrations pick up.” The firm maintains an Overweight rating and designated the stock a Top Pick.
Market concerns have pressured software stocks in recent months. Companies connected to ChatGPT creator OpenAI faced particular scrutiny from investors.
Goldman Sachs lifted its price target to $655 recently. The investment bank highlighted Microsoft’s diversified AI strategy including stakes in Anthropic and internal model development.
Questions about adoption speed persist among investors. Shares dropped last month after The Information reported Microsoft was adjusting sales quotas for enterprise AI products including Microsoft 365 Copilot. Microsoft told Barron’s that overall AI product quotas remained unchanged.
KeyBanc’s data shows steady growth in customers experimenting with AI and running pilot programs. However, full production rollouts still register in the low-to-mid-single-digit range among survey respondents.
KeyBanc maintains an Overweight rating with a $630 price target on the stock. Morgan Stanley holds its Overweight rating and Top Pick designation.
Shares traded down 0.7% at $467.50 in premarket action Tuesday.
