Wall Street analysts change their minds constantly, chasing whichever AI stock has the best headline. Goldman Sachs just did the opposite, backing a name it has already stuck with through a genuinely rough stretch this year.
The bank’s renewed conviction did not come from a spreadsheet alone. It followed a string of direct meetings with the company’s own leadership across two continents. Before making its case public, Goldman got a closer look at the strategy behind the numbers.
Goldman Sachs’ analytical case for Microsoft
Goldman Sachs named Microsoft its top pick in the artificial intelligence sector following a series of investor meetings with the company’s leadership across Europe and San Francisco.
The bank met with Microsoft’s Head of Investor Relations Jonathan Neilson and Director of IR Danielle Criste in Stockholm, Zurich, and London during the week of Sept. 14, following earlier discussions with CFO Amy Hood in San Francisco the previous week, Investing.com reported.
Goldman maintains a Buy rating on Microsoft and includes the stock on its Conviction List, Investing.com noted. The bank introduced the list in 2023 to flag roughly 20 to 25 of its most differentiated fundamental buy ideas across all of its U.S. coverage.
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The bank pointed to several strategic decisions Microsoft made over the past three years that are only now delivering visible results as enterprises evaluate competing AI platforms.
Chief among them is Microsoft’s approach to front-loading long-dated capital expenditures, a choice Goldman said gives the company greater flexibility over its short-term capex decisions today.
Goldman also highlighted how Microsoft has balanced capital allocation between first-party applications and third-party customers, improving output quality for both Copilot and Microsoft AI.
Notably, all of the fourth quarter’s $51 billion increase in remaining performance obligations came from enterprise customers rather than frontier AI labs, reducing Microsoft’s reliance on any single model provider as the broader AI ecosystem continues to evolve, Investing.com reported.
Microsoft’s AI strategy track record
Goldman’s newest endorsement builds on a pattern of continuous buy calls throughout 2026, even as Microsoft shares struggled against their Magnificent 7 peers for much of the year.
Back in April, Goldman reiterated a Buy rating and set a $600 price target, implying nearly 61% upside after the stock had dropped roughly 23% year to date. Analyst Gabriela Borges argued the risks investors were fixating on were already more than priced into the stock, according to TheStreet.
Goldman’s confidence predates that April note by months. In January, ahead of a key earnings report, the bank set an even more aggressive $655 price target, pointing to Microsoft’s growing focus on AI agents as a driver of stickier usage and more predictable long-term monetization across its vertically integrated AI compute, platforms, and applications.
The bank has also tracked Microsoft’s underlying infrastructure closely at the product level.
In February, Goldman highlighted the company’s new Maia 200 chip as a meaningful positive for Microsoft’s AI compute price-to-performance ratio, part of a broader strategy to bring Azure’s AI compute gross margins in line with its traditional CPU-based cloud workloads, as reported by TheStreet.
The backlog tells the story in numbers. Microsoft’s remaining performance obligations hit $625 billion as of Dec. 31, 2025, up 110% year over year.
Roughly 45% of that is tied to OpenAI. Demand for AI GPUs was already outpacing available supply when that number was reported, according to CNBC.
Goldman’s bullish note landed the same week Microsoft delivered less welcome news to a different part of its workforce.Bloomberg / Getty Images
Xbox layoffs cloud the good news
Goldman’s bullish note landed the same week Microsoft delivered less welcome news to a different part of its workforce.
The company’s Xbox division is in the middle of a restructuring that began in July, when Microsoft announced roughly 4,800 job cuts worldwide, or about 2.1% of its global workforce, with Xbox absorbing a disproportionate share, CNBC reported.
In the same week as Goldman’s note, The Information reported a fresh round of cuts at Xbox involving hundreds of additional roles and a consolidation of several game studios under Activision, with the next Halo title set to be developed under Activision’s oversight. Microsoft has not officially confirmed the scope of that second round.
Wall Street did not flinch. Goldman naming Microsoft its top AI pick in the same week as the layoff news tells you which signal the market is actually reading.
What this means for Microsoft investors
Microsoft’s stock has lagged its Magnificent 7 peers for most of 2026. AI infrastructure spending keeps rising. Those two things sitting next to each other create the tension Goldman is specifically betting against.
Concerns about customer concentration have not disappeared, either. A meaningful share of Microsoft’s commercial backlog is tied to OpenAI. Goldman’s point about the $51 billion RPO increase coming entirely from enterprise customers offers a specific counterargument to that risk, rather than a general reassurance.
Goldman’s bet is simple. The companies that front-loaded AI infrastructure spending will be better positioned to capture enterprise AI contracts than the ones moving faster but committing less.
Microsoft made that call three years ago. Goldman thinks the market has not fully priced it in yet.
Related: Wells Fargo resets Microsoft stock price target for 2026