Microsoft spent big on AI this year and it's acutely aware it has to make money to justify the through-the-roof capex. Two Wall Street analysts think it can.

Stifel's Brad Reback kept his Hold rating on the stock, but raised his price target to $530 from $450. Bank of America's Tal Liani rates the stock Buy and raised his price target $100-to $600 from $500.

Both Liani and Reback based their target hikes on Microsoft's cloud platform, Azure, and CoPilot, its AI assistant tool.

On Friday, shares were down 1.5% at $502.35 after ending Thursday up 2.7% at $510.12. The stock has gained 5.5% on the year as of the closing bell on Thursday.

Reback, the Stifel analyst, met with Microsoft's management this week. On Thursday, he wrote that the company is focused on "delivering acceptable returns" on its capital expenditures and on unlocking "incremental capacity" of data center that can be "quickly monetized."

Microsoft's capital spending reached $41 billion in the fiscal fourth quarter and $145 billion for the year. Wall Street thinks investors should brace themselves for heavier AI spending in fiscal 2027.

Reback wrote that Microsoft's AI strategy is already very much in play with Azure and CoPilot.

Microsoft, he wrote, is "absolutely heading in the right direct." He gave a shout-out for the company's efforts to improve the CoPilot tools that offer more and more AI large language models to its customers.

And Azure's revenue, Reback wrote, should keep growing in the coming quarters and limit "the margin drag" from the AI spending.

The growth of Azure and CoPilot has become Wall Street's frequent refrain about on Microsoft and its AI strategy.

In a sign of how important its AI offerings are, Microsoft is changing the public reporting structure for its Azure business segment.

Still, risks remain for Microsoft.

While Microsoft is well-positioned in the long term for AI, its near-term prospects "seem a bit more cloudy" because of AI behemoth Alphabet-owned Google.

"Looking forward, until either capex growth slows below Azure growth and/or Azure posts a significant acceleration in its growth, we do not expect the stock to re-rate," Reback wrote.