Microsoft Analyst Says Q3 Print From 'Favorite AI Superstar' May Boost Bullish Outlook, Sees Azure Raking In Whopping $76B Annual Revenue

Ahead of Microsoft Corp.’s MSFT quarterly earnings, an analyst on Sunday reiterated his bullish stance on the stock.

The Microsoft Analyst: Piper Sandler analyst Brent Bracelin maintained an Overweight rating and a $455 price target for the stock.

The Microsoft Thesis: Microsoft’s fiscal third-quarter results due Thursday could “strengthen our bullish stance” on the company, said Bracelin in a note. Calling Microsoft as his “favorite AI Superstar, the analyst said the company was still in the nascent stages of capitalizing on a “first mover” advantage.

Bracelin expects Azure public cloud revenue growth rate to approach 30% from the 27% trough, thanks to increasing custom AI workloads coupled with strong OpenAI and GitHub momentum. Azure’s annualized revenue run rate could hit $76 billion, he said.

Capex, and finance lease costs could come in above Piper Sandler’s $13.7 billion estimate, Bracelin said. That said, the analyst sees the need for robust capex to support broader AI and cloud adoption for the next six, plus, years.

See Also: Best Artificial Intelligence Stocks

The analyst was neutral on the M365 Copilot, given it was launched only in November and it could probably be in the very stages of adoption. He, however, expects healthy M365 Copilot contract momentum, with potential acceleration in commercial bookings.

As such, the analyst said the valuation premium Microsoft commands was warranted. “Recall, AI
is just 2% of sales but could easily 5x to 10%+ within 3-5 years, strengthening a cloud incumbency that alone has doubled to $130B+ since F2020 and could approach $200B within three years,” he said.

Analysts, on average, expect Microsoft to report earnings per share of $2.83 on revenue of $60.77 billion, according to Benzinga Pro data. This compares to the year-ago’s $2.45 and $52.7 billion, respectively.

Microsoft Price Action: Microsoft ended Friday’s session down 1.27% at $399.12, according to Benzinga Pro data. In premarket trading on Monday, the stock added 0.26% to $400.15.

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