Microsoft (MSFT +0.91%) is getting a lot of attention because it has emerged as a leading player in the artificial intelligence (AI) market. However, the company's advertising opportunity might be underestimated, according to analysts at Barclays.
On Wednesday, the firm maintained an "overweight" (buy) rating on the shares with a $475 price target, representing about 17% upside from the current share price of $407.
NASDAQ: MSFT
Key Data Points
Microsoft's $50 billion advertising opportunity
Microsoft's Bing search engine is gaining market share from Alphabet's Google. This is translating to growing revenue, but it's just getting started, according to the analysts.
Barclays argues that Microsoft could eventually rake in $50 billion in ad revenue across search, LinkedIn, and ad technology, which would represent less than a quarter of the company's annual revenue. By comparison, Google's ad revenue totaled $65 billion last year.
Microsoft will need to invest more in distributing its Bing search engine to capture the opportunity, according to Barclays, but Bing is already seeing momentum after releasing new AI features last year. In January, Microsoft said users had created 5 billion images and chats with the new features powered by generative AI. That is a huge increase from the 1 billion chats created through July.
Why buy Microsoft stock
AI is fueling growth for Microsoft in more areas than just the Azure enterprise cloud business. Management previously said it is "reshaping daily search and web habits" with its AI-powered Copilot feature. That statement suggests it has Google in its crosshairs.
If Microsoft continues to gain share of search, it would just provide another growth avenue to boost the stock over the next decade.
