Key insights
- Morgan Stanley suggests Wall Street is underestimating Microsoft's AI revenue potential. Their analysis indicates Microsoft's datacenter expansion and AI infrastructure deployment are outpacing current revenue expectations. They forecast a substantial increase in Microsoft's datacenter footprint, implying significant upside to revenue estimates for Azure and its unified cloud and AI platform, including M365, Dynamics 365, and LinkedIn.
Investing.com -- In a note to clients on Wednesday, Morgan Stanley questioned whether Wall Street is properly valuing the scale of future AI revenues at Microsoft.
The bank argued that investors may be underestimating how much monetization the company’s rapidly expanding AI infrastructure can support.
Analyst Keith Weiss writes that “GenAI demand well ahead of supply has yielded swiftly ramping Capex forecasts” for Microsoft.
However, the bank notes that revenue expectations have not kept pace. According to the firm, its “Monetization per Megawatt and Capex-Implied Azure forecasts suggest revenues estimates may be inappropriately lagging, leaving room for upward revisions.”
Weiss says the bank’s analysis of hyperscaler spending and Microsoft’s datacenter expansion points to substantial upside.
“Our analysis suggests Microsoft is deploying AI datacenter capacity well ahead of near-term monetization,” he wrote, adding that Wall Street may not be fully accounting for the scale of that future revenue potential.
The note also estimates Microsoft’s installed datacenter footprint could grow from roughly 5GW in FY24 to nearly 20GW by FY28, a fourfold increase. Even with declining revenue per megawatt, which is expected to fall from about $20–30 million today to the high teens by FY28, Morgan Stanley argues this still “suggests the potential for additional upside to estimates.”
Importantly, the analysts emphasize that Microsoft’s AI-ready infrastructure underpins not only Azure, but a unified cloud and AI platform spanning M365, Dynamics 365, and LinkedIn.
Weiss concludes: “Microsoft’s existing AI infrastructure footprint may be capable of supporting significantly higher long-term revenue estimates than currently expected.”