Microsoft Poised to Benefit as AI Investing Shifts to Recurring Enterprise Revenue

Goldman Sachs believes Microsoft is poised to benefit from the growing demand for artificial intelligence (AI) in enterprises. The investment bank's software analyst, Gabriela Borges, has outlined a subtle but important shift in AI investing, emphasizing businesses that can turn AI into recurring enterprise revenue.

Microsoft's latest quarterly results show revenue climbed 18% year over year to approximately $90 billion while Azure revenue growth accelerated to about 43%. The company also disclosed Azure now generates more than $100 billion in annual revenue. These numbers matter because Azure isn't simply renting cloud servers anymore; it has become the foundation for Microsoft's AI services.

Goldman Sachs expects Microsoft's earnings-per-share growth to accelerate from roughly 12% in fiscal 2027 to more than 20% by fiscal 2029 as Copilot adoption expands, AI operating efficiencies improve, and enterprise deployments become routine. The investment bank has added Microsoft to its U.S. Conviction List, maintaining a Buy rating and lifting its price target to $640 from $610.

Microsoft's shares are trading around $465, representing roughly 38% upside according to Goldman Sachs' latest estimate. The stock is up 5% in midday trading, following the investment bank's announcement. While Microsoft still faces risks, including elevated AI infrastructure spending and competition from other cloud providers, Goldman Sachs believes the company has one of the strongest positions to capture the next wave of AI opportunity.