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Microsoft Could See AI Revenue Boost of $100 Billion by 2027, Analyst Says

Evercore ISI analyst Kirk Materne wrote in a research note that he thinks adding AI across the Microsoft (ticker: MSFT) portfolio could provide $100 billion in incremental revenue by 2027.  He sees Microsoft generating incremental revenue from AI in three ways.

One, he thinks the company will monetize the addition of AI-driven “Copilot” software across both Office and the rest of the company’s Productivity and Business Services business, which includes enterprise applications like Dynamics and LinkedIn.

Two, he sees a boost in demand for cloud computing improving the outlook for Azure, the company’s cloud business.

And three, he sees potential for Bing to gain market share in search. (Materne notes that he has the highest conviction on the impact of adding Copilots, and the least on the outlook for Bing.)

“Clearly, there are a lot of assumptions required when estimating the impact on demand due to a potential paradigm shift of this magnitude,” Materne writes. But he nonetheless contends that his “base case” is a $50 billion-plus revenue boost for Microsoft in calendar 2027—while his “bull case” pushes that number to $100 billion.

One user had an interesting analysis on how this could play out for the stock price

How much in additional profit could $50 or $100 billion add to MSFT? Let’s do the math:

2022 Financials

Total Revenue= 198.27B

Net profit = 72.74B

% of Revenue = $72.74B/198.27B = 36.69%

Shares outstanding = 7.5B shares

2022 EPS= 72.74/7.5 = $9.70

Today’s share price = $344

PE = $334/9.7 = 34.43

Based on $50B boost:

Revenue = $250B

Profits = $250 x 0.3669 = $91.7B

Est 2027 EPS = 91.7B/7.5B = $12.23

Est PE is share Price stays the same = $344/$12.23 = 28

Based on $100B boost:

Revenue = $300B

Profits = $300 x 0.3669 = $110.1B

Est 2027 EPS = 110.1B/7.5B = $14.68

Est PE is share Price stays the same = $344/$14.68 = 23.4

Q? What share price range could be attained with $50-$100B revenue boost? If we assume that MSFT PE of about 35 will remain constant as share price rise with the rise in revenue & earnings to 2027, here’s the math:

Based on $50B: $344 X (12.23/9.70) = $433 +25%

Based on $100B: $344 X (14.68/9.70) = $520 +50%

Those would be very nice share price gains but its all hypothetical. Disclosure MSFT shareholder. Follow the data points.

source: https://www.barrons.com/articles/microsoft-ai-stock-revenue-75d5bc91


Comments on this entry are closed.

  • A Sharma

    To justify $400 stock price EPS has to go grow at 15.7% forever from current levels.

  • A Sharma

    Microsoft is ‘just getting started’ in A.I. space, says D.A. Davidson’s Gil Luria


  • @jdingle8885

    Need to hear actual product to revenue. Not hype by asset managers.

  • @cesarbrown2074

    Apple and Amazon both have voice AI . I’m not sure what these guys are talking about.

  • @cesarbrown2074

    +Microsoft will have harder time surprising investors to the upside, says Ritholtz’s Josh Brown

  • @micahbisping

    I am trying to avoid making any new buys at this point in other not to get sucked into a bear market trap.It’s tough making money in stocks when institutional investors are the driving force behind the selling.. although I read an article of people that grossed profits up to $150k during this crash, what are the best stocks to buy now or put on a watchlist?

  • @nightknight9415

    Thanks for the tip of your cap… I’ve been in $MSFT since it was a double digit stock.