You have to own Microsoft, Bernstein analysts say

Investing.com -- Bernstein analysts said investors should own Microsoft (NASDAQ:MSFT ) shares, reiterating their Outperform rating and price target of $511 per share on the stock in a note Thursday.

They point to Microsoft's growing AI revenue, projected to surpass a $10 billion run rate by the end of next quarter, as a key reason for optimism.

Microsoft's AI business comprises two main components: SaaS-based Copilots (excluding GitHub Copilot) and Azure AI. Bernstein explains that the latter generates inferencing-driven revenue from enterprises, including OpenAI, with a mix that ensures stability and healthy margins.

"Microsoft AI revenue is not exposed to the concerns relating to AI training spending but is instead predominantly inferencing which is more stable and better margins," Bernstein noted.

The analysts also highlighted the rapid growth of Microsoft 365 Copilot, which has reached a $1–$1.5 billion annual revenue run rate within a year of launch.

Although smaller than initially anticipated, Bernstein expects this business to grow steadily over the long term.

"While smaller than most hoped by the point, we believe that it will continue to grow and grow at a healthy rate for many years to come," stated Bernstein.

With Microsoft shares stagnating, Bernstein is increasingly bullish, stating, "With Microsoft's stock having gone nowhere for months we are getting much more constructive on the setup and believe that within less than a year investor sentiment will swing back toward - you have to own Microsoft."

The robust mix of stable AI revenue streams, healthy margins, and growing adoption of enterprise solutions underpins Bernstein's confidence in Microsoft as a must-have stock.

Source: Investing.com