Microsoft Corp's (NASDAQ:MSFT) newly announced enterprise pricing overhaul is “significant” and potentially supports stronger revenue growth in the cloud, according to UBS.
Analyst Karl Keirstead reiterated a 'Buy' rating and $650 price target, implying more than 27% upside from current levels.
The changes, which take effect on 1 November 2025, eliminate many volume discounts previously available to customers on enterprise agreements, except Microsoft’s largest global clients.
The policy applies across Azure, Microsoft 365, Dynamics 365, and other cloud-hosted services – representing about 55% of Microsoft’s total revenue, according to UBS.
Keirstead noted that partners were "consistent in their feedback that this results in a net price increase", estimating the impact at between 3% to 14%, depending on customer tier.
While some customers could switch to alternative contract models, UBS believes the move will standardize pricing and support recurring revenue.
The analyst added: "We have marginally more confidence in our outlook for total constant currency revenue growth of 14% in FY26,” though he is not adjusting his estimates yet.
Keirstead is also watching for a possible revenue pull-forward into September and October as customers seek to renew ahead of the change.
Microsoft’s leverage to AI trends and cloud migration are seen as supporting its valuation, with the analyst arguing the stock “still trades at a reasonable premium” given its position.