Copyright Benzinga
Wall Street analysts see Microsoft Corporation's (NASDAQ:MSFT) restructured partnership with OpenAI as a milestone in its artificial intelligence strategy. Both Goldman Sachs' Kash Rangan and Bank of America's Brad Sills reiterated Buy ratings, saying the amended agreement strengthens Microsoft's AI infrastructure leadership and sets up years of cloud-driven growth. The deal gives Microsoft a 27% diluted stake in OpenAI Group PBC (valued at about $135 billion) and extends its intellectual property rights through 2032, now including post-AGI models. $250 Billion Azure Commitment Strengthens Cloud Revenue Outlook OpenAI also committed $250 billion to Azure compute services, a move analysts say provides long-term revenue visibility and validates Microsoft's position as the leading AI cloud provider. Also Read: Microsoft Stock Moves Higher On New Deal With OpenAI Microsoft will continue to host OpenAI's commercial workloads — including ChatGPT and DALL-E — exclusively on Azure, capturing recurring compute and storage revenue across enterprise AI use cases. Goldman Sachs: One of the Most Compelling Investment Opportunities Goldman Sachs' Rangan reaffirmed a Buy with a $630 price forecast, based on DCF (3% perpetuity growth) and 38x EV/FCF and 36x P/E multiples for fiscal 2025–2026. He forecasts revenue rising from $245.22 billion in fiscal 2024 to $324.26 billion in fiscal 2026, EBITDA from $131.7 billion to $197.7 billion, and EPS from $11.80 to $15.84, driven by AI adoption, cloud demand, and productivity suite monetization. Rangan called Microsoft "one of the most compelling investment opportunities in the technology industry and across sectors." He believes the updated deal clearly defines ownership structures while reinforcing Azure's position as the preferred AI infrastructure provider. Bank of America: $640 Forecast and Strong Long-Term Returns Bank of America's Sills also reiterated a Buy rating with a $640 price objective, valuing Microsoft at 54 times calendar year 2027 estimated free cash flow and 2.5 times the two-year compound annual growth rate. He expects the $250 billion Azure commitment to meaningfully lift cloud revenue starting fiscal 2027, generating strong returns on AI infrastructure investments. Sills emphasized that Microsoft's exclusivity over OpenAI's API workloads reinforces its competitive edge and cross-sell potential across Azure, Copilot, and Dynamics platforms. Both analysts agree that the renewed OpenAI pact enhances revenue visibility and fortifies Microsoft's dominance in enterprise AI. With deep product integration, profitability, and cloud scale, Microsoft is positioned to remain the backbone of the AI economy through the decade ahead. Price Action: MSFT shares were trading lower by 0.58% to $538.91 at last check Wednesday. Read Next: Magnificent 7 Market Cap Tops $22 Trillion – And Nvidia Just Got Bigger Than Japan Photo by Tada Images via Shutterstock
