A Goldman Sachs analyst, Kash Rangan, has reiterated his Buy rating for Microsoft, lowering its price target from $515 to $500. However, Rangan is bullish about Microsoft’s future, specifically its investment in Azure and artificial intelligence (AI).
Rangan believes that Azure will outperform expectations due to AI’s contribution to growth, market share gains against competitors, and increased demand for high-return services as the market gains clarity on interest rates and the US election. He points to a Goldman Sachs survey where 74% of Global 2000 CIOs said they would primarily allocate Gen-AI workloads to Azure, surpassing Google (53%) and OpenAI (42%). This strong preference for Azure bolsters Rangan’s optimism, and he projects Azure to become a $200 billion business by 2029.
Furthermore, Rangan anticipates that Microsoft will significantly increase capital expenditures, particularly in AI. He has revised his 2026 and 2027 capital expenditure estimates upwards by $10 billion and $11 billion, respectively. Rangan views this investment as a necessary step to position Microsoft for the structural shift towards Gen-AI, which he believes presents a vast revenue opportunity across the AI technology stack.
He highlights that Microsoft’s rapid capital expenditure buildout allows it to reach critical scale in Gen-AI faster than it did with Azure a decade ago. This accelerated growth is a key factor driving Rangan’s view of Microsoft as one of the most compelling investment opportunities in the technology sector.
Rangan emphasizes that Microsoft’s strong presence across the cloud stack, including applications, platforms, and infrastructure, positions it advantageously to capitalize on long-term trends such as Gen-AI, public cloud consumption, SaaS adoption, and AI/ML.
Despite the analyst’s optimistic outlook, Microsoft’s shares traded down 0.31% to $416.18 on Thursday.
