Microsoft's strategic investments in artificial intelligence (AI) are yielding substantial returns, particularly through its Azure cloud platform and partnership with OpenAI. Morgan Stanley analysts Keith Weiss and Josh Baer have revised their growth projections for Azure, now anticipating approximately 33% annual growth through 2028, an increase from their previous estimate of 27%. This adjustment suggests Azure could surpass $200 billion in revenue by that year. (benzinga.com)
A significant factor in this optimistic outlook is Microsoft's deepening collaboration with OpenAI. The analysts now assume Microsoft will capture a 20% share of OpenAI's expenditures, encompassing activities like fine-tuning and post-training processes. Once OpenAI reaches its $13 billion infrastructure cap, any additional computing needs are expected to directly contribute to Azure's revenue. (forbes.com)
Beyond OpenAI, there's robust demand from other AI customers utilizing Microsoft's APIs, subscriptions, and enterprise solutions. This widespread adoption has led Morgan Stanley to raise its price target for Microsoft to $530, maintaining a bullish stance on the company's prospects. (investing.com)
However, the Microsoft–OpenAI partnership is set to conclude in 2030. If the agreement isn't renewed or if OpenAI opts for alternative providers, Azure's growth trajectory could face challenges. Despite this potential hurdle, Morgan Stanley believes that the immediate benefits from AI monetization and broader cloud adoption outweigh any short-term margin pressures resulting from substantial capital expenditures. (ainvest.com)
In summary, Microsoft's strategic focus on AI, bolstered by its partnership with OpenAI and the expanding capabilities of Azure, positions the company for significant growth in the coming years. While there are potential risks on the horizon, the current trajectory suggests a strong return on Microsoft's AI investments.
Source: GuruFocus Microsoft's AI Bet Is Paying Off Big
