July 22 - Microsoft (MSFT, Financial) aims to boost AI‑related revenue by $25 billion by fiscal 2026, driven by rapid adoption of Azure‑based services like Copilot and Fabric.
The tech giant's growth engine centers on its Azure cloud platform. Azure posted 33% year‑on‑year growth in Q3 FY 2025, with AI services contributing roughly 16 percentage points of that expansion.
Instead of creating an autonomous AI unit, Microsoft embeds AI on top of its products. The number of users of GitHub Copilot increased four times to more than 15 million, and customer accounts of Microsoft 365 Copilot rose three times, with the adoption continuing in Word, Excel, and Teams.
In data analytics, paid users of Microsoft Fabric climbed 80% to 21,000. A Morgan Stanley survey found 97% of CIOs plan to deploy Microsoft AI tools within a year, and Wedbush checks suggest over 70% of Microsoft's installed base will adopt AI features within three years.
The integrated model creates a “flywheel,” where AI‑powered apps spur Azure consumption. To meet demand, Microsoft is opening new data centers in 10 countries across four continents in a single quarter.
However, the AI push has boosted capital expenditure by 55% over the last 12 months. CFO Amy Hood said CapEx will remain elevated in FY 2026 as the company scales data‑center capacity.
There is also friction from strategic partnerships. OpenAI has resorted to Google hardware, and Microsoft internally made a six‑month of delay in its own chip is called Braga, leaving in place a possible dependence on Nvidia GPUs.
Nevertheless, Microsoft envisions a 34-35% growth of Azure in Q4 FY2025 and a long-term high margin through AI. A lasting competitive edge of cloud services can be explained by the AI reach in the company.
Is MSFT Stock a Buy?
Based on the one year price targets offered by 50 analysts, the average target price for Microsoft Corp is $535.17 with a high estimate of $650.00 and a low estimate of $423.00. The average target implies a upside of +4.92% from the current price of $510.06.
Based on GuruFocus estimates, the estimated GF Value for Microsoft Corp in one year is $511.57, suggesting a upside of +0.30% from the current price of $510.06. Gf value is Gurufocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. For deeper insights, visit the forecast page.
