Piper Sandler analysts reiterated an Overweight and a $425 per share price target on Microsoft (NASDAQ:MSFT).
The analysts see the formal release of M365 Copilot this week as an 'iPhone moment' for the Redmond-based tech titan. This event is important and is a part of a broader strategy to capitalize on a first-mover advantage in generative AI.
“Similar to the Microsoft Cloud opportunity that began in 2008 that has now grown into a $125B+revenue franchise, we see Microsoft AI having similar $100B+ scale potential longer-term,” the analysts wrote in a client note.
“While Microsoft AI revenue is small at an estimated $0.5B last quarter, the unprecedented pace of innovation, aggressive AI investments, and broad enterprise reach could result in Microsoft AI scaling to $10B+ in revenue within three years (ARR would be even higher).”
For instance, the analysts note that it took Azure and AWS as many as 10 years to see their revenues eclipse $10 billion.
Another positive is that GitHub Copilot has quickly scaled to 1 million paid users.
“We remain buyers of MSFT on positive news flow into year-end on new AI products and user events across Microsoft, OpenAI, and GitHub,” the analysts concluded.