Microsoft’s new OpenAI deal strengthens long-term Azure growth outlook

Investing.com -- UBS called Microsoft’s revised agreement with OpenAI “a positive,” saying the $250 billion commitment provides stronger visibility into future Azure cloud revenue and reaffirms Microsoft’s central role in the generative AI ecosystem.

The brokerage said the scale of Microsoft’s commitment, likely spread over seven to eight years, or roughly $30 billion to $35 billion annually is well above expectations and should lift longer-term cloud growth forecasts.

The deal also extends Microsoft’s intellectual property and hosting rights for OpenAI models to 2032 while keeping API hosting exclusivity largely intact.

UBS said the agreement removes a lingering overhang around the companies’ partnership by clarifying commercial terms and ensuring Microsoft remains OpenAI’s primary compute provider. The firm added that the arrangement could validate similar AI infrastructure exposure for rivals such as Oracle.

Some terms fell short of expectations, including the retention of the “AGI clause,” which could affect hosting rights if OpenAI declares artificial general intelligence. UBS downplayed the risk, noting both Microsoft and OpenAI leaders have questioned the practical meaning of the term.

The final 27% equity stake was slightly below forecasts, while details on revenue sharing were not disclosed.

UBS kept its $650 price target and positive view on the stock, saying the announcement bolsters confidence in Microsoft’s AI roadmap and long-term Azure trajectory.

The brokerage values Microsoft at 54 times projected 2027 free cash flow, a premium it said is justified by sustained cloud and AI growth potential.

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