Microsoft's Azure Strength and Copilot Potential Drive Analyst Optimism

Microsoft Azure is 'stable,' Copilot should boost Office: BofA

Microsoft (NASDAQ:MSFT) is slated to report fiscal fourth-quarter results on July 30 and two of the tech giant's big initiatives are expected to contribute to growth, Bank of America said. "Azure strength balanced across AI and core workloads Partners suggests sustained AI and core workload strength, which is likely to translate to Azure growth of 31.5% y/y (8% AI contribution), versus our base for 30.5% y/y," analyst Brad Sills wrote in an investor note. Sills has a Buy rating and $510 price target on Microsoft. Separately, Microsoft is seeing "early" traction for its Copilot artificial intelligence initiative, which should drive growth for Office, Sills added. "While channel commentary does not suggest Copilot is seeing significant incremental traction, 4 of 10 partners cited it as a driver of revenue growth in Q4, which is enough to achieve our base case for 1.7% penetration to the eligible E3/E5 base," Sills continued. "More importantly, in an upside case, we believe the Office business could be on track to achieve 20% growth by Q1FY26." For Microsoft's entire Productivity and Business Processes segment, Sills is expecting $20B in revenue, including "modest" upside in Commercial Office. A consensus of analysts expect Microsoft to earn $2.07 per share on $64.37B in revenue for the coming quarter. More on Microsoft Microsoft: Benefits From OpenAI Partnership Unveiling Microsoft's Long-Term Growth Plans Microsoft: There Is Still A Remaining Runway, Buy Anthropic partners with Menlo Ventures to create $100M AI startup fund Microsoft looks to demonstrate AI leadership in latest financial results: Citi

Microsoft stock target hiked at BofA on Azure strength By Investing.com

Bank of America raised its price target for Microsoft (NASDAQ:MSFT) stock to $510 from $480 in a note Wednesday, citing robust performance in the company's Azure cloud services and early traction with its new Copilot feature. "Channel commentary [is] consistent with a healthy Q3," notes analysts, with most Microsoft partners tracking above or in line with expectations ahead of the Q2FY24 results, which will be reported on July 30. The report highlights sustained Azure strength, forecasting a year-over-year growth of 31.5% for Azure, with an 8% contribution from AI workloads. This exceeds the initial estimate of 30.5% growth. The firm expects $100 million in upside to their Productivity and Business Processes (PBP) segment revenue estimate, driven by modest Commercial Office gains and strong premium E3/E5 cycles. Office 365's performance is also noted as a significant contributor to Microsoft's growth. Analysts anticipate a continuation of the "sustained strength in the premium E5 cycle," along with early success in Copilot upsell deals. They foresee the Office segment driving higher-than-expected growth, particularly as Copilot gains more traction. For the More Personal Computing (MPC) segment, analysts predict a $50 million upside to their $15.5 billion estimate, supported by IDC's preliminary report of 3% year-over-year PC shipment growth, surpassing the forecasted 2%. Despite some concerns about incremental traction, analysts are optimistic about Copilot's potential, with four out of ten partners citing it as a revenue growth driver in Q4. This aligns with the base case for a 1.7% penetration rate into the eligible E3/E5 base, and they project the Office business could achieve 20% growth by Q1FY26 in an upside scenario. Bank of America reiterates its Buy rating for Microsoft, stating its new target reflects "potential for upward revision to FY25 Office growth." The firm values Microsoft at 46 times the estimated FY25 free cash flow, highlighting the strong growth outlook driven by Azure and Office 365.

Mizuho raises Microsoft stock target by $30 on strong Azure growth, still Outperform By Investing.com

On Tuesday, Mizuho Securities updated its outlook on Microsoft Corporation (NASDAQ:MSFT), increasing the price target to $480 from the previous $450, while maintaining an Outperform rating on the stock. The adjustment follows Microsoft's fiscal third-quarter earnings, where the tech giant reported total revenue of $61.9 billion, surpassing the $60.8 billion forecast by analysts. The revision was influenced by Microsoft's Azure cloud service's performance, which saw a 31% year-over-year constant currency (CC) revenue growth, outperforming the expected ~28%. Notably, Azure's core consumption CC growth was reported at 24% year-over-year, consistent with the previous quarter and approximately three percentage points higher than anticipated. This growth was attributed to an uptick in cloud migration activities. Additionally, artificial intelligence (AI) advancements have played a significant role in Azure's revenue increase, contributing around seven percentage points to its growth, compared to a roughly six-point contribution in the previous quarter. Despite the ongoing challenges in the global market, Mizuho highlighted that Microsoft's medium-term revenue growth prospects appear to be more significant than many may realize. The firm's confidence in Microsoft is also bolstered by the company's tangible adoption and monetization of generative AI (GenAI) technology. Mizuho's updated price target of $480 is primarily derived from its Sum of the Parts (SoTP) model, and reflects a forward price-to-earnings (P/E) multiple of 40 times for calendar year 2024 estimates and 34 times for calendar year 2025 estimates. In other recent news, Microsoft Corporation is in the spotlight with several key developments. BMO Capital Markets has raised the price target for Microsoft to $500 from $465, maintaining an Outperform rating, primarily due to the expected growth in the company's cloud business, particularly Azure. Meanwhile, GOP lawmakers have requested an intelligence briefing concerning Microsoft's $1.5 billion investment in UAE-based AI company G42, citing potential national security concerns. Google (NASDAQ:GOOGL) Cloud is also reassessing its stance on Microsoft's cloud licensing practices following Microsoft's settlement of an antitrust complaint with the Cloud Infrastructure Services Providers in Europe. Microsoft has also withdrawn from its observer role on the OpenAI board amid intensifying antitrust focus, expressing confidence in OpenAI's improved governance and stating that its observer role is no longer necessary. Finally, Microsoft has agreed to pay $14 million to settle allegations of unlawful penalization of employees taking leave in California. These are among the recent developments surrounding the technology giant. Following Mizuho Securities' updated outlook on Microsoft Corporation (NASDAQ:MSFT), InvestingPro data provides additional context to the company's financial standing. Microsoft's market capitalization stands at a robust $3.37 trillion, reinforcing its position as a leading force in the technology sector. The company's P/E ratio is currently at 39.14, suggesting a premium valuation, which aligns with Mizuho's forward P/E multiple estimates for the coming years. Additionally, Microsoft has demonstrated strong revenue growth, with a 13.97% increase over the last twelve months as of Q3 2024, further supporting the positive outlook on the company's financial health and growth trajectory. InvestingPro Tips highlight Microsoft's consistent dividend growth, having raised its dividend for 18 consecutive years, and its ability to maintain dividend payments for 22 consecutive years. These factors, combined with a low price volatility and a strong foothold in the software industry, may offer investors a sense of stability and reliability. For those seeking a deeper dive into Microsoft's financials and additional strategic insights, InvestingPro offers more tips on the company, which can be accessed with the promo code PRONEWS24 for up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.

What's Going On With Microsoft Stock Today? - Microsoft (NASDAQ:MSFT)

UK CMA is investigating Microsoft's hiring of certain former employees of Inflection AI. Microsoft Corporation's MSFT shares are trading relatively flat in the premarket session on Tuesday. Mizuho analyst Gregg Moskowitz maintains Microsoft with an Outperform and raises the price target from $450 to $480. On Tuesday, the U.K. Competition and Markets Authority said it is investigating Microsoft's hiring of certain former employees of Inflection AI, Inc. and its entry into associated arrangements with Inflection. The deadline for phase 1 decision is September 11, 2024. The CMA is investigating whether Microsoft's recruitment of former Inflection employees and their related agreements may constitute a merger under the Enterprise Act 2002. According to Benzinga Pro, MSFT stock has gained over 31% in the past year. Investors can gain exposure to the stock via ETF Opportunities Trust T-Rex 2X Long Microsoft Daily Target ETF MSFX and SPDR Select Sector Fund - Technology XLK. The CMA said it aims to determine if this has or could potentially lead to a significant reduction in competition within the U.K. markets for specific goods or services. Also Read: Baidu-Backed Jiyue To Launch Jiyue 07 Electric Sedan In September; Larger Than Tesla Model 3: Report The regulatory agency moved quickly to address investments by major tech firms in AI startups, citing concerns that Silicon Valley giants were leveraging these investments to influence and dominate emerging markets, reported Bloomberg. The agency indicated it would utilize merger control regulations to assess whether certain investments warrant scrutiny in the U.K., acknowledging that these partnerships may not follow conventional deal structures. Initially examining Microsoft's investment in Mistral AI, it concluded that Microsoft did not gain the capability to influence Mistral's commercial decisions significantly. Earlier this year, Microsoft hired Mustafa Suleyman, along with Karén Simonyan, Inflection's Chief Scientist and co-founder, and most of the startup's employees. Despite raising over $1.5 billion and launching a chatbot named PI, Inflection continued to grapple with developing a viable business model, as Suleyman had indicated post-launch, the report added. "We are confident that the hiring of talent promotes competition and should not be treated as a merger," Microsoft said. "We will provide the UK CMA with the information it needs to complete its inquiries expeditiously," the report added. Price Action: MSFT shares are trading higher by 0.04% to $454.15 premarket at last check Tuesday. Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors. Photo via Shutterstock Read Next: As Trump Promises To Hold Dollar Steady, Expert Warns His Second-Term Could Lead To 'Severe Deterioration:' 'Policy And Actions Speak Louder Than Slogans' Market News and Data brought to you by Benzinga APIs