With Microsoft’s June quarter earnings report just around the corner, analysts are becoming more optimistic about the company’s performance.
Set to release on July 25, Wall Street predicts robust results for the tech giant, particularly due to its artificial intelligence software initiative in the coming years.
This week, Microsoft’s shares hit a record high following the announcement of higher-than-expected pricing for its AI copilot software for Microsoft 365. Microsoft 365 encompasses various office applications such as Word, Outlook, Teams, and Excel.
Experts anticipate further stock gains in the future.
Stifel analyst Brad Reback, who reiterated his Buy rating on Microsoft shares, increased his target price for the stock from $320 to $380. In recent Thursday trading, Microsoft’s stock experienced a slight 1.4% decline, settling at $350.08.
Reback believes that Microsoft will surpass its forecasted 26% to 27% growth in the Azure cloud business this quarter. He expects the recent downward pressure on growth, caused by customers seeking to optimize spending, to subside. Additionally, he foresees strong growth in the Office 365 sector. However, he notes that the PC-related business may face challenges due to lackluster post-Covid demand.
Microsoft’s Outlook for Fiscal 2024
Focus on Growing Contributions from Artificial Intelligence
In the upcoming outlook, Microsoft is expected to emphasize the increasing importance of artificial intelligence (AI) in its business. This growth is anticipated to come from both Azure, its cloud computing platform, and the new AI Copilot software for the Microsoft 365 suite of office applications. Analysts project that the guidance will call for double-digit revenue percentage growth, excluding any contribution from the pending acquisition of Activision Blizzard (ATVI).
Positive Set-Up into Q4
Citi analyst Tyler Radke, who maintains a Buy rating on the stock, has raised his target price to $425 from $340. Radke’s proprietary reseller survey indicates that spending growth is likely to accelerate into fiscal 2024.
Despite some areas of macro caution, Radke sees a positive set-up going into Q4. He points to positive partner feedback and generative AI tailwinds as contributing factors. As a result, Radke has raised his estimates for the next three years for both Office and Azure. In his view, Microsoft offers investors “a unique earnings growth acceleration and Gen AI monetization story in mega-cap software.”
With its focus on AI and its positive outlook into Q4, Microsoft continues to position itself as a leader in the tech industry.
