You've probably seen the headlines about Microsoft's (MSFT, Financial) AI ambitions, but here's the real scoop: Wells Fargo's (WFC, Financial) team, led by Michael Turrin, is still bullish—an Overweight rating stays in place, and they just nudged their 12-month target up to $585.
Why? Because Microsoft ripped off a $13 billion annual recurring revenue run rate for its AI business in under three years—its fastest product ramp ever—despite running into capacity bottlenecks.
Turrin's analysts figure that by June 2025, that AI run rate could be approaching $20 billion, and if all goes well (think fewer supply constraints and sharper economics on its OpenAI deal), it might blow past $100 billion in calendar-2029 revenue.
Even in a more conservative “base” scenario, they're modeling over $80 billion of AI revenue by then, with double-digit net-new growth each year.
And let's not forget Copilot: they see FY 2026 as the breakout moment when enterprise uptake really takes off. Just a 10 % penetration across Microsoft's roughly 430 million seat base could translate into about $12 billion more ARR.
Sure, there's chatter about tweaking the OpenAI contract, but Wells Fargo doesn't expect anything drastic unless Microsoft can snag a better revenue share, longer IP rights or more favorable AGI terms.
The real catalysts to watch? Q4 earnings commentary, any hints on capacity coming online, and Copilot adoption stats—because if those line items hit, you'll know Microsoft's AI pivot isn't just talk.
