3M’s Overweight Upgrade Hinges on Its New Microsoft Azure Deal

JPMorgan upgraded 3M to Overweight from Neutral on Friday, raising its price target to $180 from $178, and framed the move around growth momentum most investors still associate with chipmakers, not tape and sandpaper. The call from JPMorgan analyst Chigusa Katoku lands two days after 3M and Microsoft announced a deal to wire Azure’s AI data centers with 3M’s optical connectors, a detail that reads like a footnote in most of Friday’s stock coverage.

That footnote is doing the heavy lifting. JPMorgan’s own note ties 3M’s next leg of earnings growth to AI and datacenter demand spreading beyond the obvious beneficiaries, and the Microsoft contract is the clearest proof that spread has reached St. Paul, Minnesota. It also arrives alongside a new PFAS lawsuit from New York’s attorney general and a share price that InvestingPro already flags as slightly ahead of fair value.

JPMorgan Puts a $180 Number on a Dow Name

The upgrade implies about 11% upside from Thursday’s closing price, according to CNBC’s report on JPMorgan’s bullish call. Katoku wrote that datacenter driven demand is now broadening out into parts of the economy outside of the obvious beneficiaries, and 3M’s own guidance backs the point: management told investors in the second quarter it expects organic growth solidly above 3%, with weakness in consumer electronics and automotive offset by strength in datacenter and semiconductor sales.

Three things stack the growth case. Pricing gains could add roughly 10 cents to earnings per share in the fourth quarter and into 2027 even as inflation cools. 3M has already embedded about $125 million in extra costs assuming oil sits at $100 a barrel, a built-in cushion rather than a live risk. And $700 million in proceeds from the Scott Safety divestiture, expected to close July 1, gives 3M room to shrink its share count further.

None of that comes cheap. The stock trades at a price-to-earnings ratio near 31, and InvestingPro’s fair value model already reads it as slightly overvalued even before Friday’s target increase.

The Microsoft Deal Behind the Upgrade

On July 15, 3M and Microsoft announced that Azure would become the first publicly named hyperscale cloud provider to deploy 3M’s Expanded Beam Optical technology, a fiber connector built around a beam interface instead of the direct physical contact traditional connectors require. 3M says the design is faster to install and easier to maintain inside the cramped, dusty aisles of a live data center. In exchange, 3M will run more of its own back office on Microsoft’s AI and digital platforms.

The deal did not appear out of nowhere. 3M joined the Expanded Beam Optics Multi-Source Agreement Group in May, an industry effort to standardize the connector format across the AI supply chain. As of July 7, that group counted 44 members, among them:

• AMD, the chipmaker whose accelerators sit inside many of the same racks 3M’s connectors will serve
• Nvidia, whose GPUs anchor the AI clusters driving hyperscale buildouts
• Oracle, a cloud operator expanding its own AI infrastructure footprint
• Meta, one of the largest private builders of AI data center capacity
• Foxconn, a major contract manufacturer for server and networking hardware

Microsoft described the arrangement as the start of continued technical work, pointing to joint innovation opportunities across Microsoft’s data center ecosystem. For a company whose stock has spent years trading on filtration, adhesives and industrial tape, a named role inside Azure’s supply chain is a genuinely new growth lever, and it is the lever JPMorgan is pricing in.

How Far the AI Wave Has Spread

3M was not the only industrial name JPMorgan touched on Friday. The bank also lifted Emerson Electric to Overweight with a $157 target, pointing to a backlog up 9% year over year and long cycle projects in power, LNG, semiconductors and aerospace. The two calls share the same logic: AI and datacenter capital spending is now reaching companies that make connectors, valves and instruments rather than chips themselves.

JPMorgan has run this playbook before. In April, the bank raised its Lumentum price target to $950 from $565, betting on the optical networking supplier’s role in AI scale-up traffic. 3M’s EBO push follows the same thesis with a different kind of supplier: a century-old materials science company instead of a specialized photonics firm.

Wall Street’s broader view of 3M has not fully caught up yet. Recent price targets show a wide spread:

The average of those targets sits well below JPMorgan’s new number, and the consensus rating across covering analysts is still listed as Hold, according to MarketBeat data cited in recent coverage. JPMorgan is out ahead of most of the Street on how much of the AI datacenter story belongs to 3M.

The Ledger Still Carries a New Lawsuit

The upgrade did not erase 3M’s legal overhang. On July 9, New York Attorney General Letitia James sued 3M, DuPont de Nemours, Chemours and Corteva, accusing the companies of selling PFAS, or forever chemicals, for decades while hiding known health and environmental risks.

Big companies like 3M and DuPont knowingly sold toxic products that threatened New Yorkers’ health and polluted our environment for decades.

Attorney General James said in a statement announcing the lawsuit seeking cleanup funding and damages. The 74-page complaint, filed in state court in Albany, also seeks disgorgement of profits, restitution and warning labels on any PFAS products still sold in the state.

The suit adds to a legal docket 3M has been managing for years. It is a separate matter from the company’s broader multidistrict PFAS settlements, and it lands right as Wall Street is asking investors to look past 3M’s chemical legacy toward its AI infrastructure future.

What Tuesday’s Earnings Will Test

3M reports second quarter results on Tuesday, July 21. That report will be the first real chance for management to say how much of the Microsoft deal, and the broader AI datacenter demand JPMorgan is counting on, is already showing up in the numbers rather than in press releases.

Frequently Asked Questions

What Is 3M’s Expanded Beam Optical Technology?

Expanded Beam Optical, or EBO, is 3M’s fiber connector design that uses a beam interface instead of the direct physical contact traditional optical connectors rely on. According to 3M, the technology has shown strong signal performance in live data center conditions, where dust exposure and routine handling during installation and maintenance normally degrade connection quality.

Has 3M Disclosed Financial Terms of the Microsoft Deal?

No. Neither company disclosed a dollar figure for the partnership. 3M has said only that it is spending an undisclosed amount to expand manufacturing capacity for EBO components to meet rising demand from hyperscale customers.

Is 3M Facing PFAS Lawsuits Beyond New York’s Case?

Yes. 3M’s most recent quarterly filing with the Securities and Exchange Commission lists several pending matters, including the pending Ohio PFAS class action dating back to 2018 and a Philadelphia case brought by former Phillies players over alleged PFAS and ethylene oxide exposure from AstroTurf at Veterans Stadium.

What EPS Does JPMorgan Expect From 3M’s Second Quarter?

JPMorgan is projecting earnings of $2.26 per share for the quarter, two cents above the Wall Street consensus estimate of $2.24, according to CNBC’s reporting on the bank’s note to clients.

Disclaimer: This article covers analyst commentary and corporate disclosures for informational purposes only, is not investment advice, and readers should consult a licensed financial advisor before trading 3M or any related security; figures are accurate as of publication on July 18, 2026.