Goldman Sachs: Microsoft AI Investment Focus Shifts to Returns

Goldman Sachs said in a research report on Oct. 15 that as Azure demand stays strong, Copilot commercialization progresses, and its in-house AI chips enter use, the market's focus on Microsoft is shifting from the scale of AI investment and revenue growth to infrastructure unit economics and return on invested capital (ROIC). The bank maintained a Buy rating and a $640 12-month price target on the stock.

Goldman expects Microsoft's Azure revenue growth to reach 46%-47% in the fiscal first quarter of 2027, above the company's prior guidance of 44%-45%. It also estimates that around 5GW of new compute capacity will come online in fiscal 2027, with total capacity potentially expanding to about 40GW by mid-2030. The bank said Microsoft's multi-layered positioning across cloud, AI models, enterprise software and custom silicon allows it to capture AI value through different channels and allocate compute flexibly between internal uses and external customers, improving long-term returns.

The bank also noted that Microsoft's new Maia 300 chip could further reduce AI inference costs and improve Azure's long-term profitability, while a changing capex structure gives the company more room to adjust investment pace.