Microsoft: Maintaining a Buy Rating as AI and Cloud Growth Offset Structurally Higher Power Costs

Gabriela Borges, an analyst from Goldman Sachs, maintained the Buy rating on Microsoft. The associated price target remains the same with $655.00.

Gabriela Borges has given his Buy rating due to a combination of factors related to Microsoft’s ability to manage rising power costs while sustaining its long‑term AI and cloud growth strategy. She acknowledges that industry developments point to structurally higher electricity prices over the medium term, including Microsoft’s own commitment to pay elevated utility rates so that local communities are shielded from data‑center cost pass-throughs, and potential long-dated power procurement mechanisms such as take‑or‑pay contracts. However, her analysis indicates that even meaningful increases in power costs translate into only modest pressure on Microsoft’s projected free cash flow margins by FY30, leaving the broader investment case intact.

Borges also emphasizes Microsoft’s strong positioning to mitigate these cost pressures through efficiency-focused innovation and proactive power procurement. She highlights the company’s ongoing work to improve energy efficiency in its infrastructure—illustrated by initiatives such as Fairwater—alongside strategic efforts to secure dedicated power capacity that can reduce future supply constraints for AI workloads. While she notes the trade-off that long-term power purchase agreements could elevate fixed costs if AI demand underperforms expectations, her scenario analysis suggests that the upside from continued AI and cloud adoption outweighs these risks. In her view, Microsoft’s scale, innovation, and disciplined capital allocation support durable growth and cash generation, justifying a Buy rating despite the evolving power-cost backdrop.

In another report released yesterday, TD Cowen also reiterated a Buy rating on the stock with a $625.00 price target.