By Nate Wolf

Analysts at Citi boosted their price target for Microsoft stock on Thursday, citing the strength of the tech giant's Azure cloud-computing arm and the potential cost savings of recent job cuts.

Citi, which has a Buy rating on the stock, lifted its target price to $540 from $480, a roughly 20% increase from Wednesday's close of $450.44.

The company said on Tuesday it will cut its workforce by around 3%, equaling several thousand employees. A Microsoft spokesperson told Barron's the cuts would "best position the company for success in a dynamic marketplace."

Citi analysts see the layoffs as a positive, estimating they could save Microsoft roughly 4%, or $2.5 billion a year, in operating expenses. Management may reinvest some of these savings in research and development, particularly on AI initiatives, the analysts added.

With fears of an economic slowdown due to U.S. tariffs subsiding, Citi also sees strong growth on the horizon for Microsoft's Azure cloud-computing business.

Citi analysts estimate the Azure business will grow more than 30% a year through Microsoft's 2026 fiscal year, up from previous expectations of growth in the high 20s.

Microsoft reported better-than-expected earnings for its fiscal third quarter earlier this month, buoyed by 33% year-over-year revenue growth for Azure.

The tech giant's stock is up 7.3% in 2025 as of Wednesday's close, while the S&P 500 has risen 0.2% and the tech-heavy Nasdaq Composite has dropped 0.9%.

Write to Nate Wolf at nate.wolf@barrons.com

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May 15, 2025 09:17 ET (13:17 GMT)

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