Microsoft is having its iPhone moment

Microsoft is having its "iPhone moment" in AI, according to Wedbush analysts, thanks to the increasing adoption of its Copilot AI.

• Microsoft is on the verge of a major turning point with Copilot, analysts said.
• As the popularity of its AI tool grows, analysts say its cloud products will continue to benefit.
• The tech giant exceeded Wall Street's estimates in Q1.

Microsoft's investments in artificial intelligence might be driving it toward a historical moment.

Analysts from investment bank Wedbush Securities said in a note on Friday that they believe the tech giant is having its "iPhone moment" in AI. The term is used to describe the turning point when a piece of technology sees a steep rise in popularity and widespread adoption — similar to that of Apple when the iPhone took off with consumers.

For Microsoft, Copilot might be the driver. The analysts said they've observed "major momentum" in the use of AI that stands to benefit CEO Satya Nadella and his company even more than it already has.

AI is on track to change the tech industry forever, and they predict it will continue to push Microsoft cloud products like Azure forward.

"We estimate for every $100 of cloud Azure spend with MSFT the last few years there is an incremental $35-$40 of AI spend for Nadella & Co. looking ahead," the Wedbush analysts, led by Dan Ives, wrote.

And if Microsoft's Q1 report is any indication, AI is already paying off. Microsoft Cloud generated $35.1 billion in revenue in the first quarter — up 23% year-over-year — and Nadella said investing in Copilot is part of the reason.

Copilot is "orchestrating a new era of AI transformation," Nadella said in the earnings release.