This is the ‘most underappreciated’ driver for Microsoft’s business, according to one analyst
Microsoft’s classic productivity suite may soon become the most overlooked catalyst for the company’s growth, according to a Jefferies analyst who says the firm’s AI‑enhanced software offerings could unlock fresh earnings potential.
Underappreciated Software Segment
Jefferies research analyst Brent Thill argues that Microsoft 365 Cloud – the long‑standing enterprise package that houses familiar tools such as Word and Excel – is being undervalued by investors focused on the firm’s artificial‑intelligence narrative. Thill points out that while the market readily credits Azure’s cloud‑computing platform as a clear growth engine, the revenue upside embedded in the legacy M365 suite receives far less attention.
AI Integration Creates New Paths
Thill notes that Microsoft’s ongoing development of AI capabilities is increasingly being paired with its existing M365 products. By embedding generative‑AI features into familiar applications, the company can offer bundled solutions that appeal to businesses seeking to modernize workflows without abandoning entrenched software. This strategy, he says, opens distinct avenues for additional subscription and usage fees, expanding the financial contribution of the software division beyond its traditional base.
Comparison with Azure Focus
Analysts have repeatedly highlighted Azure’s rapid expansion as the primary driver of Microsoft’s top‑line growth in recent quarters. Thill, however, believes that the AI‑augmented M365 platform represents a complementary, yet under‑recognized, source of momentum. He suggests that the market’s concentration on Azure may cause investors to overlook the incremental earnings that could arise from AI‑enhanced productivity tools.
Potential Impact on Investment Thesis
According to Thill, the underestimation of Microsoft 365 Cloud’s role could lead to a skewed investment case that undervalues the company’s overall growth trajectory. By acknowledging the synergy between AI advancements and the firm’s core software suite, investors might gain a more balanced view of where future revenue streams are likely to emerge. The analyst’s perspective invites a reassessment of how the broader AI story fits within Microsoft’s diversified business model.
Outlook for Microsoft
As Microsoft continues to roll out AI features across its product lineup, the integration with the familiar M365 environment may prove pivotal for enterprise customers seeking incremental productivity gains. Thill’s assessment underscores that, while Azure remains a headline‑grabbing growth engine, the AI‑infused software business could serve as a quietly powerful engine of earnings. Recognizing this dynamic may help investors better gauge the full scope of Microsoft’s evolving revenue landscape.
Source: marketwatch.com · 2026-09-21