Microsoft is entering 2026 with a quiet confidence that is very different from the doubts that people have about its big investments in AI. Some investors are still worried about how much money it would take to construct and manage AI infrastructure, but many experienced Wall Street analysts think the market is underestimating how important Microsoft has become to the next phase of business technology. Microsoft's AI-driven growth plan, especially its Azure cloud platform, which many people think is about to take off, is at the center of this dispute.

The recent changes in Microsoft's stock price show this conflict. Since late October, the shares have gone down and traded below short-term technical averages, which shows that sentiment has cooled. But the stock has stayed stable around longer-term support levels, which means that long-term investors are still holding on. The stock was up a little bit in weak holiday trading, but the bigger concern for the market is whether Microsoft's AI thesis has already been priced in or if it is still misunderstood.

Daniel Ives, an analyst at Wedbush Securities, is firmly in the camp that says doubt has gone too far. This week, he sent out a letter to clients in which he said that Wall Street is missing the growth potential of Microsoft's Azure cloud business as AI goes from testing to real-world use. He said again that he thought the company will do better than the market and kept his positive price target. He called Microsoft a "core winner" in the AI space. His optimism comes from the fact that he thinks Microsoft is at a unique crossroads of cloud infrastructure, enterprise software, and AI tools. This crossroads is becoming more and more valuable.

"Investors are still not sure about Microsoft's AI-driven growth profile, which gives (Chief Executive Satya) Nadella & Co. a chance to prove the skeptics wrong. This hyperscaler cloud company is in the sweet spot for enterprise strategic AI deployments," Ives said.

That doubt is not completely baseless. Microsoft is spending a lot of money on data centers, special chips, and infrastructure that uses a lot of energy to support big AI workloads. These investments can hurt margins in the short term, and some investors are worried that returns will take longer to show up than they thought. Ives, on the other hand, says that this view ignores the wider picture. As businesses go past pilot projects and start using AI in their day-to-day operations, the companies that own cloud platforms and development ecosystems will be in the best position to make money.

Ives says that making money from the cloud and AI will probably lead to both more sales and higher profit margins in the next few years. Microsoft's edge isn't just in giving people raw processing power; it's also in giving them a comprehensive stack of services, including security, data tools, productivity applications, and AI services that are getting smarter all the time. Azure has become a basic part of many businesses' operations, from developers making custom models to companies using AI copilots in all of their workflows.

Ives stated, "In a nutshell, we think Microsoft will have a huge year in 2026, and the stock is a great buy at these levels because Redmond will be a key part of the next stage of the AI Revolution buildout."

Other people on Wall Street agree with this attitude. Kirk Materne, an analyst at Evercore ISI, has listed Microsoft as one of his top ideas for 2026, putting it in the same league as other big business technology companies. His research takes into account the ongoing discussions about the timetables for making money with AI, the return on investment for businesses, and the need for capital expenditures. But he says that these arguments are less important than the fact that the biggest cloud providers are becoming the only ones who can control AI progress.

Materne added, "The speed of AI monetization, enterprise ROI (return on investment), and growing capital expenditures will continue to be topics of discussion, but we think that all AI roads lead to the hyperscalers."

Materne thinks Microsoft is in a great position in the software industry because it has a lot of different products. Microsoft works on almost every area of enterprise IT, from operating systems and developer tools to databases, collaboration software, and cloud infrastructure. This is different from organizations that just work on one layer of the technology stack. This gives AI many chances to be adopted and many ways to make money as more people use it.

Materne stated, "In the software market, we see Microsoft and Oracle as the two best-positioned vendors to take advantage of this cycle. Both platforms have strong visibility, a growing backlog, and many ways to add value as AI moves from proof of concept to production use cases."

This change from proof of concept to manufacturing is very important for the industry. A lot of businesses tried out AI during the past year by doing tiny tests to see if it would work. The next step is to include AI to regular business tasks, which requires dependability, safety, compliance, and the flexibility to grow. Even though innovation may seem sluggish at smaller firms, big, well-known platforms like Microsoft's tend to do better in these areas.

Materne also says that the market might not be giving Microsoft enough credit for how flexible it is when it comes to making money from AI at different levels of the business. AI can be offered as a platform, as infrastructure, or as features that are built into other products. Microsoft works in all three areas, which gives it more options than most of its competitors.

Materne stated, "We think we're just starting to see the potential of AI, and Microsoft's ability to make money from AI at different levels of the enterprise stack or through first-party or third-party services is not getting enough attention for how it could affect growth in the long term."

People who have been watching Microsoft for a long time will recognize this moment. People have doubted the corporation in the past when it was making a lot of investments, but it always comes out stronger as new platforms mature. People were unsure about Azure in its early years, but it has since become one of the company's most essential growth engines. AI might follow a similar path, with short-term uncertainty giving way to long-term, compounding gains.

There are still risks, though. There is a lot of competition amongst cloud providers, big tech companies are being watched more closely by regulators, and the economics of AI are still changing. Not every AI project for business will be useful straight away, and some may even fail completely. These facts temper the most hopeful predictions and explain why investors are still cautious.

One thing that makes 2026 so important is that it could be the year when many of these issues start to get answers. If enterprise AI deployments grow as projected and Microsoft makes it plain how to make money, the worries of today could turn out to be only a short halt instead of a long-term problem. If adoption slows down or expenses stay high, on the other hand, cynicism could grow.