jewhyte
Microsoft (NASDAQ:MSFT) is seeing “solid demand” going into its fiscal fourth-quarter results, due in part to a “modest” acceleration in its Azure cloud service, Morgan Stanley said.
Shares were little changed in premarket trading on Monday.
“Expect Microsoft to meet buyside expectations for a modest acceleration in Azure growth and a modest deceleration in O365 commercial growth,” analyst Keith Weiss wrote in an investor note. “Concerns over the timing of the GenAI contribution overhang the stock; addressing questions on ROI becomes more important for the stock to work post-print.”
Weiss, who rates Microsoft shares Overweight with a $520 price target, said there should be a “clean beat” across key segments the firm is leaning positively, but given the fact the stock is trading at roughly 31 times 2025 earnings, earnings per share growth needs to remain where it is for the stock to continue to work.
“While Microsoft shares have outperformed against the software peer group over the trailing three months (+7.5% vs. Large Cap Software +1.6%), shares continue to lag Mega Cap peers and the broader market by a significant margin over the same period of time (NASDAQ +13.7% and S&P500 +9.6%),” Weiss added. “In our view, the relative performance is largely reflective of Microsoft’s safe-haven positioning driving marginal outperformance against peers over a period of broader Software de- grossing, while the underperformance against the Mega Cap cohort speaks primarily to an underappreciated medium-term outlook on Microsoft’s GenAI monetization potential.”
A consensus of analysts expect Microsoft to earn $2.93 per share on $64.37B in revenue.