Microsoft's Growth Soars with AI Innovations, Projected to Lead in Public Cloud by 2032: Analyst

Morgan Stanley analyst Keith Weiss maintained Microsoft Corp MSFT with an Overweight and raised the price target from $465 to $520.

Weiss highlighted that as investors hone in on the Generative AI cycle and look to identify assets able to monetize and compound the benefits of these innovations, he extended his discrete Microsoft forecast to 5-years, highlighting the durable EPS story enabled by their strong secular positioning. 

Weiss expected Microsoft’s leadership position for multiple secular growth trends to translate into a 14% revenue CAGR and 16% EPS CAGR through fiscal 2029. 

Weiss noted that Microsoft’s improving positioning for Public Cloud drives an increasing share of the overall IT wallet, as evidenced by Microsoft Commercial revenues gaining 3.5% points of share within IDC’s overall software market estimates over the past five years. 

The analyst noted that more robust positioning for Enterprise PaaS workloads should enable Azure to take the market share lead in Public Cloud by 2032. 

His current model assumes revenues from Microsoft’s most enormous three GenAI initiatives ramp from ~$5 billion in fiscal 2024 to almost $67 billion in fiscal 2029, contributing ~4% point of growth annually during that period. 

Weiss’s new price target reflected his confidence in Microsoft’s EPS growth trajectory’s durability and in its AI leadership position ahead of the significant market opportunity.

Citi analyst Tyler Radke attended Microsoft’s Fabric Community Conference in Las Vegas and spoke to partners to better understand opportunities and challenges for customers adopting Microsoft’s Fabric data architecture. 

The analyst came away incrementally positive, with further product enhancements and encouraging commentary from customers and partners. 

The inaugural event had a good turnout and demonstrated Microsoft’s willingness to invest in and build a more comprehensive Azure Data platform that could intensify the competition environment with data platform ISVs amidst the rise of data estate modernization. 

Radke’s takeaways suggest Microsoft is innovating rapidly. He noted that combining Fabric, Co-Pilot, and other GenAI-related services reinforced Microsoft’s leadership position in the GenAI investment cycle.

Microsoft stock gained over 50% in the last 12 months. Investors can gain exposure to the stock via SPDR Select Sector Fund – Technology XLK and Fidelity MSCI Information Technology Index ETF FTEC.

Price Action: MSFT shares traded higher by 0.49% at $425.35 on the last check Thursday.

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