Piper Sandler raises price forecast for MSFT to $485, citing strong cloud performance

Microsoft (NASDAQ:MSFT) captured attention on Tuesday as Piper Sandler raised its price forecast for the tech titan, attributing this to the robust performance of its cloud business, particularly due to artificial intelligence.

The company’s shares saw a slight increase in premarket trading.

Brent Bracelin, an analyst, noted in an investor report that Microsoft Cloud services took 13 years to reach the $100B revenue milestone from F2010-F2023, encompassing approximately $176B+ in combined capex+lease expenditure. He predicted that the next $100B in cloud revenue could be achieved in merely three years, necessitating significant data center investments to cater to a potential doubling of Microsoft Cloud revenue to over $200B by the end of F2026. He advised growth investors to look past immediate concerns of an AI overbuild, focusing instead on the ongoing broader cloud transformation that could sustain double-digit growth in both revenue and profit until 2030.

Bracelin increased his price forecast for Microsoft from $465 to $485, maintaining his Overweight rating.

On the subject of AI strength, Bracelin stated that Microsoft has already reaped substantial benefits from the AI surge, but there is more on the horizon. He projected that by 2026, the revenue composition for cloud facilitated by AI could increase to 63%, a rise from the current 53% and a mere 10% in fiscal 2016.

Bracelin also mentioned that Azure is likely nearing an $85B run-rate, with growth exceeding 30% year-over-year, including seven percentage points related to AI.