Bernstein: Microsoft Has Not Overbuilt AI Capacity, 100 Billion Lease Commitments Misinterpreted by Market

According to TechFlow Research, a Bernstein research report on August 10 pointed out that Microsoft's current lease liabilities increased 33% year-over-year to $114.4 billion, future lease obligations surged 255% year-over-year to $329.1 billion, and fiscal 2027 procurement commitments reached $169 billion. The report believes the market has misread these figures: existing leases are spread over a 13-year period, with rent expiring in 2027 at approximately $13.2 billion; the $329.1 billion future leases will commence sequentially between 2027 and 2033, assuming an average lease term of 12 to 15 years, the annualized rent growth rate is approximately 12% to 16%, roughly in line with Microsoft's commercial cloud revenue historical growth rate; among the $169 billion procurement commitments, GPU servers account for only a portion and are concentrated within 12 months, with only $25 billion for fiscal 2028 and beyond. The report maintains Microsoft's "Outperform" rating, with the price target raised from $647 to $660 and the P/E multiple raised from 26.5x to 27x. Bernstein believes that data center designs support hybrid deployment of CPU and GPU, and if AI demand slows down, capacity can be shifted to traditional cloud business. AI accounts for approximately 16% to 17% of Microsoft's commercial cloud revenue, but since AI gross margin is approximately 27%, far lower than traditional cloud business, AI accounts for approximately 40% of commercial cloud cost of sales. Management stated at the Q4 earnings call that current demand still far exceeds available supply.