Microsoft revenue boost from AI requires 'patience,' but it's coming: JP Morgan
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Microsoft (NASDAQ:MSFT) held its annual product event in New York City on Thursday where it showed off new Surface laptops and a singular version of its Copilot artificial intelligence tool to work across its products, including Windows and Microsoft 365.
And while there has been excitement about the company's ability to monetize AI, investment firm J.P. Morgan said patience is needed.
"While we are encouraged by the updated timeline on the release of some of its AI products, we continue to believe that the potential revenue uplift from these products could be modest in the immediate near term, thus requiring some patience," analyst Mark Murphy wrote in an investor note. He suggested the "best adoption-ramp period" for technology could be anywhere between 12 and 36 months out.
Microsoft (MSFT) said that Copilot for 365 would be available to enterprise customers starting November 1 and the new version of Windows with Copilot will be available on September 26.
Murphy, who has an overweight rating and $385 price target on Microsoft (MSFT), pointed out that it will "take time" for enterprises to run their own tests to see if Microsoft 365 Copilot is worth the $30 per month per user charge. Additionally, the Satya Nadella-led company will have to boost its GPU and CPU capacity, resulting in a previously mentioned "material" ramp in spending, with the return on that spending likely to take time.
"By way of analogy, predicting the adoption curve in the first 1-2 quarters of general availability might be akin to predicting the score of a football game after the first 5 minutes: you could be off by a lot, in either direction, and it is an exercise in futility, as it will have little correlation to the final outcome," Murphy added.
Despite all that, Murphy still sees Microsoft (MSFT) as being ahead of other companies in the race for AI.
"Considering the rapid pace of innovation and depth of AI enhancements across the Microsoft portfolio, we reaffirm our positive view of Microsoft, as the company's positioning has been materially improving on a multi-year forward horizon," Murphy added.
Microsoft (MSFT) shares were fractionally higher in pre-market trading on Friday.

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