Morgan Stanley: Microsoft's Profits Could Double by the 2029 Financial Year

The technology group Microsoft could double its earnings per share before the end of the decade, the American weekly magazine Barron's quoted Morgan Stanley analyst Keith Weiss as saying. He referred to the strong traction in the areas of cloud computing and AI software.

Morgan Stanley expects annual growth in earnings per share of 16%
Weiss assumes that Microsoft could achieve annual revenue growth of 14% and annual earnings per share growth of 16% by the 2029 financial year due to its "impressive" portfolio in the areas of cloud and AI. Microsoft's earnings could rise to $24 per share by 2029 - compared with $11.72 per share in fiscal 2024 - and the company would also focus on controlling costs, it added.

Share of cloud business in total IT spending climbs to 18%
The analyst commented that Microsoft's strong cloud business had increased its share of total IT spending to 18% in calendar year 2023 from 14.5% in 2018. By 2027, this share could rise to 21.3%, supported by the company's early leadership in generative AI applications.

"Bull case": AI revenue of $120 billion - by 2029
Revenue from Microsoft's three largest generative AI businesses - Microsoft 365 Copilot, GitHub Copilot and AI-related revenue from the Azure cloud business, could total $67 billion in fiscal 2029, compared to an estimated $5 billion in fiscal 2024. This would increase the company's annual revenue growth rate by about four percentage points. In the analyst's bull case, AI revenue could rise to  up to $120 billion by 2029.

As part of his highly optimistic research note, Weiss has reiterated his "Overweight" rating and raised his price target from $465 to $520. On Friday morning (April 12), the share is trading at around $428.

Want to keep reading?

You can find the entire story in The Trader Times. Get a 4-week trial subscription now and access the entire archive!