Microsoft (MSFT) delivered a strong fiscal Q3 as it continues to make the most of the artificial intelligence momentum across its tech stack by driving efficiencies across workloads, Wedbush said in a Wednesday note.

The company continues to focus on the AI monetization strategy within the cloud, with capital expenditures increasing quarter over quarter, Wedbush analysts said. They expect capital expenditures to keep growing in fiscal 2026 with the company continuing to build out data centers and capitalize on the expected strong demand.

The revenue growth of the company's Azure cloud computing platform came in at 33%, beating the Street's expectation of 31%, with AI making up around half of the growth at 16%, the analysts said, adding that the growth was "eye-popping" in the midst of macro uncertainty.

The analysts said that they anticipate that the cloud and the underlying Office 365/Windows ecosystem will make up a larger portion of the company revenue moving forward, spurring growth and margins in fiscal 2026.

Wedbush maintained the company's stock rating at outperform and increased the price target to $515 from $475.

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