08:53 AM EDT, 06/26/2025 (MT Newswires) -- Microsoft's ( MSFT ) rising capital spending tied to its generative AI investments point to an upside in Azure AI revenue forecasts and support a multi-year growth cycle, Morgan Stanley said in a note Thursday.

According to the note, the company's updated capital expenditure model shows Azure AI revenue could exceed $200 billion by 2028 under a 60% gross margin scenario, well above the current estimate of $170 billion.

Furthermore, OpenAI is expected to account for the majority of Azure AI growth, with other AI offerings like GitHub Copilot and Azure Foundry also contributing to overall adoption.

Morgan Stanley also said Microsoft ( MSFT ) remains well-positioned as a leader in generative AI, with strong long-term capital efficiency and improving margin potential. However, the investment firm noted that some investors remain concerned about Microsoft's ( MSFT ) reliance on OpenAI and limited transparency around the partnership.

The investment firm maintained its overweight rating on Microsoft ( MSFT ) and raised its price target to $530 from $482.