Goldman reiterates Buy on Microsoft over gen-AI, Copilot offerings showing promise
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Goldman Sachs reiterated its Buy rating on Microsoft (NASDAQ:MSFT) and $400 price target following the company's Envision conference as the firm sees Gen-AI presenting a total addressable market, or TAM, over $135B and a revenue opportunity that can exceed $10B.
Goldman Sachs' analysts said that they left the conference increasingly confident that Microsoft is making progress on its rich product roadmap, with Microsoft 365 Copilot and Fabric expected to go live by the end of year.
The analysts added that their conversations suggested a healthy demand pipeline, with thousands of customers on the waitlist for M365 Copilot (despite a beta of about 600 customers), and the rollout of Fabric's private beta to 22,000 customers.
The firm noted that Microsoft's comments about seeing a 35% step-up in developer productivity (when deploying GitHub Copilot to its own developer base) and anticipating $100M in cost savings from similar efficiency gains within its support staff (through Azure AI Studio) provided additional confidence that this backlog can convert to paying users due to companies' appetite toward high-ROI, quick time-to-value solutions.
The tech giant's fast time to market also lead the analysts to expect adoption to ramp once these features go live in early CY24.
While Microsoft intends to monetize most of these services separately, the analysts highlight Sales Copilot and other CRM-oriented gen-AI services as areas where the company is likely to lean into broad customer adoption before capitalizing on incremental revenue opportunities.
Microsoft has a Hold rating at Seeking Alpha's Quant Rating system, which consistently beats the market. Seeking Alpha authors' average rating is also Hold. Meanwhile, the average Wall Street analysts' rating is more positive with a Buy.

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