Goldman Sachs analysts have expressed optimism about Microsoft's (MSFT, Financial) future, citing its strong position as a super cloud service provider with extensive commercial applications. As capital expenditures slow and generative AI transitions from infrastructure to platform and application layers, Microsoft is well-positioned to capitalize on this shift, which is expected to positively impact long-term profitability.
Despite reports of potential delays or cancellations of AI data center leases, Goldman Sachs maintains its positive outlook on Microsoft and its capital expenditure forecasts. Microsoft has reportedly canceled several leasing agreements with private data center operators, affecting hundreds of megawatts of power. The company, however, remains committed to its $80 billion capital expenditure plan, while acknowledging possible strategic adjustments in infrastructure development.
Goldman Sachs reaffirms Microsoft's buy rating, projecting a 22.5% increase in its stock price. The firm maintains its capital expenditure estimates for Microsoft at $8.8 billion and $9.1 billion for fiscal years 2025 and 2026, respectively. With Microsoft's cloud business reaching approximately $100 billion in annualized revenue, operational leverage is expected to drive earnings per share (EPS) growth, potentially doubling by fiscal year 2028.
Goldman Sachs highlights Microsoft's ability to capture long-term trends such as generative AI, public cloud consumption, SaaS, digital transformation, AI/ML, business intelligence/analytics, and DevOps, thanks to its significant market share across cloud layers.
