Microsoft Corp.'s (MSFT  ) artificial intelligence (AI) cloud-computing services may yield higher profits than initially anticipated, according to financial services firm Bernstein, Barron's reports.

In a statement released on Tuesday, Bernstein's analyst Mark Moerdler reaffirmed an Outperform rating on Microsoft's stock and minutely increased his price target to $400 from $398.

Moerdler's research suggests that Microsoft has taken a significant lead in the development of Generative AI offerings, platform software, and design architectures. These tools assist clients in capitalizing on their data and AI resources. As part of this advancement, Microsoft is investing heavily in GPU/AI supercomputers to meet growing demand.

The analyst also highlighted that the impact on Microsoft's Azure margins from Generative AI is less than initially expected. He sees potential for increased revenue and profitability as Microsoft continues to add more high-margin technologies, including pre-built AI models and other services.

Microsoft's CFO Amy Hood earlier this month reaffirmed the company's optimistic forecast that its suite of AI tools will reach $10 billion in revenue at a faster rate than any other software business in its history.

The software giant's shares closed slightly lower at $328.65 on Tuesday, according to data from BenzingaPro.