Microsoft checks show AI enterprise adoption accelerating: Wedbush

Recent checks into Microsoft’s (NASDAQ:MSFT) artificial intelligence products and services show that adoption in the enterprise has accelerated, Wedbush Securities said.

“We have seen deal conversions for broader enterprise scale AI deployments ‘accelerating’ in the field as the AI Revolution takes hold and many MSFT customers now focused on deploying enterprise use cases across a number of verticals with financials, government, and retail clear standouts,” analysts at the firm wrote in a note to clients.

The analysts raised their price target on Microsoft to $600 from $515, maintained their Outperform rating, and kept the Satya Nadella-led firm on its Best Ideas List.

Delving a bit deeper, the analysts said that over the next three years, more than 70% of Microsoft’s installed base will have this type of AI functionality in the enterprise and commercial markets, which should change the company’s growth trajectory.

“Our recent partner checks have been incrementally strong around Copilot deployments with MSFT customers, and ultimately we estimate this could add another [roughly] $25 billion to Redmond’s top-line trajectory by FY26,” the analysts explained.

They continued: “We estimate for every $100 of cloud Azure spend with MSFT the last few years, there is an incremental $50 (was $40) of AI spend for Nadella & Co. looking ahead. Our thesis remains that the cloud and AI monetization is going to comprise a bigger and bigger piece of Redmond going forward and will ultimately spur growth and margins over the coming years.”