"AI+ Cloud Computing" has a bright future, Piper Sandler sings praises for Microsoft ahead of its performance report
Piper Sandler raised Microsoft's target price to $485, maintaining a "neutral" rating, believing that Microsoft's cloud business is performing strongly. It is expected that by 2026, cloud computing revenue may double to over $200 billion. Microsoft is already one of the biggest beneficiaries of the artificial intelligence boom, but there is still more growth potential in the future. Wall Street generally expects Microsoft to deliver strong performance in the quarterly earnings report to be released next week
According to the Zhitong Finance APP, Piper Sandler has raised its target price for Microsoft (MSFT.US) from $465 to $485 and maintained a "neutral" rating, citing strong performance in its cloud business, especially in artificial intelligence.
Piper Sandler analyst Brent Bracelin stated, "It took Microsoft's cloud services 13 years from 2010 to 2023 to break the $100 billion revenue milestone, including approximately $176 billion in total capital expenditures and lease expenses." "By 2026, Microsoft's cloud computing revenue could double to over $200 billion. Growth investors should look beyond recent concerns about overbuilding in artificial intelligence and see that a broader cloud transformation is still ongoing, which may help maintain double-digit revenue and profit growth by 2030."
Microsoft is already one of the biggest beneficiaries of the artificial intelligence boom, but Bracelin believes the company will benefit even more in the future. By 2026, the proportion of AI-supported cloud computing revenue is expected to increase from the current 53% to 63%, compared to only 10% in the 2016 fiscal year.
Bracelin added that Azure's annualized revenue run rate should be close to $85 billion, with a year-over-year growth of over 30%, including a seven percentage point growth related to artificial intelligence.
It is worth noting that Microsoft will announce its quarterly earnings for the quarter ending in June next week. Due to the growth of its cloud business and investments in artificial intelligence, Wall Street generally expects strong performance from the software company.
Furthermore, despite the global impact of last week's faulty update from CrowdStrike (CRWD.US) affecting Microsoft Windows computers and disrupting the global economy, the impact on Microsoft's stock price was minimal.
As of the close of trading on Tuesday, Microsoft rose by 0.43% to $444.85