Microsoft's AI Strategy Drives 30% Azure Growth, Evercore ISI Says

Evercore ISI has identified Microsoft as an attractive long-term investment target, emphasizing the company's successful artificial intelligence strategy and the consistent growth of its Azure cloud services. The firm notes that Microsoft's current stock price corresponds to a 29x price-to-earnings ratio based on GAAP earnings per share for the fiscal year 2026, which is considered an appealing risk-reward profile.

Microsoft's AI strategy has been gaining momentum, with the company integrating advanced AI capabilities into its products and services. This integration has not only improved the user experience but also created new revenue streams. The Azure cloud services division has demonstrated remarkable growth over multiple quarters, reinforcing its leadership position in the cloud computing market.

Evercore ISI's analysis indicates that Microsoft's robust fundamentals and strategic initiatives position it well for sustained growth. The company's commitment to innovation and its ability to adapt to market trends make it a preferred choice among long-term investors. The firm's assessment highlights the potential for Microsoft to deliver consistent value to its shareholders, making it a top pick for investors seeking long-term growth opportunities.

Evercore ISI's analyst, Kirk Materne, highlighted that the annual revenue from AI-related services on the Azure platform has surpassed $14 billion, while the annual revenue from Microsoft365 Copilot (an AI assistant) is close to $2.5 billion. However, the more significant point is that enterprise-level AI applications are still in their early stages. Looking ahead to the fiscal years 2026 and 2027, AI business is expected to continue driving Microsoft's performance.

Materne added that as AI computing power continues to be deployed and non-AI businesses stabilize, Azure is expected to maintain a steady revenue growth rate of over 30% in the coming quarters, even if the growth of non-AI businesses within Azure returns to normal levels. This outlook underscores the enduring strength of Microsoft's cloud services division and its potential to remain a key driver of the company's overall growth.