After Microsoft (MSFT) reported better-than-expected fiscal third-quarter results, Goldman Sachs increased its price target on the shares to $480 from $450 while keeping a Buy rating on the name. The investment bank is bullish on MSFT's AI business.

A development team working together to create the next version of Windows.

MSFT's Azure Is Getting a Lift From AI 

As AI expands, more data is being moved to the cloud, lifting Azure's revenue, according to Goldman. The investment bank noted that Azure's revenue jumped 35% versus the same period a year earlier, excluding currency fluctuations.

Goldman expects Azure to continue to grow its AI revenue rapidly during the current quarter, and it thinks the unit can also get a lift from boosts in "non-AI workloads."

Other Positive Metrics

The number of users of Microsoft's Copilot tripled last quarter versus the same period a year earlier, while more than 230,000 enterprises are utilizing Copilot Studio, the firm's AI-powered graphical development tool.

Goldman estimates that MSFT's free cash flow can rise 3% during the current fiscal year, while its earnings per share can jump 17%.

The Recent Price Action of MSFT

In the last month, MSFT has jumped 15%, while the stock has added 3.5% in the last three months.

While we acknowledge the potential of MSFT, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than MSFT but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey