Microsoft's AI Story Is Still Being Discovered, Says Goldman

By Bloomberg Technology

Categories: Startup, VC, AI

Summary

Microsoft's AI story is still being discovered—the stock has underperformed peers despite significant behind-the-scenes progress on Copilot, monetization levers, and infrastructure scaling. Goldman predicts substantial upside from unlocking this 'discovery value' as product improvements become visible to markets over the next 12 months.

Key Takeaways

  1. Copilot adoption grew 50% in one quarter (20M to 30M installed seats) while product quality improvements—Work IQ integration, semantic search, frontier model access—are finally translating into better industry feedback, creating a positive feedback loop.
  2. Microsoft reduced Docker live times for new GPUs by 50% and added another gigawatt of capacity this quarter while tracking to double overall capacity in 2 years—proving execution speed on supply side matches AI demand growth.
  3. GitHub's shift to consumption-based monetization for power users creates a direct ROI link—as customers extract more value, Microsoft's monetization scales proportionally, representing a broader pattern of untapped monetization levers.
  4. Shift in industry conversation from pure CapEx focus to software platform strategy: success now depends on maximizing ROI from AI infrastructure through nuanced algorithm/model selection (open source, frontier models, proprietary) rather than compute alone.
  5. Microsoft's 'discovery value' penalty box creates opportunity—the market undervalues behind-the-scenes progress while competitors get credit for announcements, but 12-month outlook shows this gap will close as improvements become undeniable.

Related topics

Transcript Excerpt

As your growth at that level, it seems to be the main metric. So let's start there. What do we actually learn about that ROI through the Azure number? Hi. Good morning. It's interesting because from the outside in we can certainly see component pricing moving higher. We can see CapEx announcements. We can see memory pricing. But we don't always have perfect visibility into the other side of that equation, which is Microsoft's ability to monetize the ROI on the other end in the Azure business. And there are a couple of really interesting dynamics this quarter. When you check something like GitHub, for example, GitHub is now moved to being able to being monetized on a consumption basis for power users such that as customers get more value out of it, well, Microsoft directly gets more monetiz…

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