Microsoft (MSFT, Financial data) is showing encouraging signs of renewed investor interest as Bernstein analysts point to strong profit margins tied to the IT giant’s artificial intelligence capabilities. Microsoft’s strategic position in AI is seen as a long-term growth driver, although it lags behind competitors and broader market indices for 2024.
Mainly thanks to its Software-as-a-Service products, including the Copilot suite and Azure AI, which cover Azure OpenAI services. Microsoft’s AI revenue comes from These products, according to Bernstein analyst Mark Moerdler, provide a consistent revenue stream, less dependent on startup-led training for large language models. According to Moerdler, this arrangement positions Microsoft’s AI efforts as a contribution to overall profitability rather than a potential financial burden.
At the end of the second fiscal quarter of 2025, AI revenues exceeded the annual rate of $10 billion. While Azure OpenAI is worth between $5.1 billion and $5.8 billion, Azure AI is expected to add around $9.7 billion to that total. Another major service, GitHub Copilot, is expected to run between $1 billion and $1.1 billion per year in the next quarter.
With a penetration rate of approximately 0.7% to 1% in its first year, Moerdler noted that Office 365 Copilot quickly gained popularity generating annual revenue of $1 billion to $1.5 billion. dollars. Setting a benchmark for the expansion of Microsoft’s other artificial intelligence products, he said the adoption rate is among the fastest among commercial solutions. Moerdler expressed hope in the solution’s ability to grow steadily over the next few years, although he admits that revenue statistics will not meet early expectations.
Another key area of analysis was the connection between Microsoft and OpenAI. Media sources indicate that OpenAI’s estimated revenue of $3.7 billion in 2024, including $2.7 billion from ChatGPT, could lead Microsoft to have inference revenues ranging from $2.5 billion to $3 billion in fiscal year 2025. Moerdler pointed out that Microsoft’s agreements with OpenAI provide control through public funding systems and help reduce financial risks.
Recent events further underline Microsoft’s strong market position. Regarding Microsoft’s many revenue streams, including its supremacy in cloud computing through Azure, its growing presence in generative artificial intelligence and its acquisition practices, analysts remain hopeful.
Microsoft once again created news with its purchase of Activision Blizzard for $69 billion, thus confirming its presence in the gaming sector. Completed in 2024, the deal enhances Xbox products and strengthens the company’s subscription gaming model, which analysts see as a region with high-margin growth potential. The 0.8% dividend yield and continued share buyback policy also highlight the company’s commitment to delivering value to its investors. With free cash flow exceeding $60 billion in fiscal 2024, Microsoft is demonstrating financial resilience and the ability to invest in areas for future expansion.