Morgan Stanley Sees Upside as Microsoft Datacenter Capacity to Quadruple by FY28
MSFT•Morgan Stanley forecasts Microsoft’s datacenter footprint will grow from 5GW in FY24 to nearly 20GW by FY28, supporting fourfold capacity expansion despite megawatt monetization falling from $20–30M to high teens. The bank argues AI revenue estimates trail Capex-implied Azure forecasts, signaling potential upward revisions.
1. Morgan Stanley’s AI Revenue Analysis
Morgan Stanley analysts argue that current Wall Street expectations undervalue Microsoft’s future AI revenue potential. They highlight a gap between rapidly increasing AI infrastructure Capex and more muted revenue forecasts, suggesting room for upward estimate revisions.
2. Datacenter Capacity Growth Projections
The analysis projects Microsoft’s installed datacenter footprint to expand from roughly 5GW in fiscal 2024 to nearly 20GW by fiscal 2028, a fourfold increase driven by surging GenAI demand. This expansion underpins Azure and the company’s unified cloud and AI platform across M365, Dynamics 365 and LinkedIn.
3. Implications for Azure Monetization and Estimates
Even with projected declines in monetization per megawatt—from about $20–30 million today to the high teens by FY28—the vastly larger capacity base implies significant incremental revenue. The bank’s Capex-implied Azure forecasts indicate that consensus revenue models may be lagging actual monetization potential.
4. Potential Stock Impact
If Microsoft’s AI infrastructure supports higher-than-expected monetization, earnings estimates and consensus price targets could see upward revisions. Investors may reprice the stock to reflect stronger long-term growth driven by underappreciated AI revenue streams.
