Microsoft's Premium ChatGPT Service Set to Supercharge Azure Growth: Analyst Predicts Even Wider Lead Over AWS

Oppenheimer analyst Timothy Horan reiterates an Outperform rating on Microsoft Corp MSFT with a price target of $330.

Microsoft's reportedly upcoming release of premium private ChatGPT service for enterprises should have a positive upwards bias to Horan's already industry-leading FY24E Azure growth of constant currency 24% (+27% USD), widening the lead over Amazon.Com Inc AMZN Amazon Web Services (~+9%). 

The new service, consistent with his January AI's iPhone Moment report prediction that the most profitable use case for Microsoft/OpenAI's commanding position in autoregressive Generative AI (not "legacy" recommendation AI), will be hosting private instances for deep-pocketed, data-sensitive enterprise customers. 

Information cited pricing ten times (the analyst estimates 5-10c per query) OpenAI's public paid service.

The analyst recalled his recent analysis showing that, while Azure grew by $914 million in calendar 1Q23, AWS shrank for the first time by $24 million during the same period, while Alphabet Inc GOOG GOOGL Google Cloud Platform rose $149 million but likely contracted absent accounting changes. 

The cloud performance suggests that 1Q23 marked an inflection point, with Microsoft's emerging dominance in the hyper-scale cloud market only set to increase with Azure OpenAI and related halo effects. 

There was no change to the analyst's FY23 and FY24 estimates, which he raised last week.

Price Action: MSFT shares traded lower by 0.15% at $304.46 on the last check Wednesday.