Truist Securities analyst Terry Tillman reiterated a Buy rating and $675.00 price target on Microsoft (NASDAQ: MSFT)

The analyst commented, "We expect the largest area of questioning to be the "Total Cap" of revenue share from OpenAI to Microsoft. While the 20% historical revenue share remains, we are unsure when the "cap" would hit as OpenAI is growing its revenue rapidly. No longer paying revenue share to OpenAI would suggest some cost or gross margin burdens being alleviated for Microsoft. OpenAI over the past year had struck cloud deals with Oracle (ORCL, NR), Google Cloud (GOOG, Buy, Squali), and AWS (AMZN, Buy, Squali). These deals were generally made possible through Stateless API's; even if OpenAI collaborated with AWS/GCP, any resulting stateless API calls to OpenAI models still had to be hosted on Azure. With this new update, there is more flexibility for OpenAI to build AI workflows using other partners it struck deals with. We are largely unsurprised from this announcement as 1) Investors were searching for clarity on the agreement coming into last quarter’s earnings 2) Microsoft is seemingly attempting to reduce dependency risk by developing in-house models 3) There is still an extremely large compute shortage and OpenAI was striking deals with competitors like AWS/GCP 4) In an era where Anthropic (Private) added ~$10B ARR in March alone, OpenAI cannot afford to let IP cause any delays while also likely working to disentangle itself and its future fortunes solely with Microsoft, especially as it pursues agentic AI opportunities in the enterprise market."

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Shares of Microsoft closed at $424.62 yesterday.