Microsoft Corporation (NASDAQ:MSFT) analysts saw potential short-term setbacks with capacity constraints and weaker guidance than expected but were also looking at an exciting path for AI monetization ahead after first-quarter financial results.

The Microsoft Analysts: Bank of America analyst Brad Sills reiterated a Buy rating on Microsoft with a $510 price target.

Wedbush analyst Daniel Ives maintained an Outperform rating with a $550 price target.

Piper Sandler analyst Brent Bracelin maintained an Overweight rating with a $470 price target.

Goldman Sachs analyst Kash Rangan reiterated a Buy rating with a $500 price target.

Bank of America on MSFT: Strong growth of 34% for Microsoft's Azure beat an estimate of 33%, but the segment's future may be impacted by capacity constraints, Sills said in a new investor note.

Sills lowered financial estimates on the updated guidance, while he noted the outlook could be conservative from the company.

"We view second-quarter results as solid across the core Azure and Office growth businesses, though tempered by a softer second quarter outlook," Sills said.

The analyst said the lowered outlook is not "a demand issue" and the second half of the fiscal year could see a reacceleration.

Wedbush on MSFT: The first-quarter earnings report helped make Ives more bullish on the stock, with AI monetization the key for the future.

Ives said the Azure growth of 34% including a 12% positive impact from AI showed the "massive growth tailwinds" the company is seeing.

The analyst disagreed with shares trading down after the report on concerns for the second quarter outlook.

"The new Azure reporting standards have moved Street numbers all around and a slight decel is totally expected by many investors," Ives said. "We would be strong buyers of MSFT on any weakness."

Ives called the AI growth a "once in a 40-year tech transformation" and highlighted Microsoft's expected annual revenue run rate of $10 billion for AI in the next quarter.

"The bears will try to split hairs on any number but ultimately this is a tech stalwart in major growth mode … and we see no signs of slowing down."

Piper Sandler on MSFT: The quarterly results and outlook were a mixed bag for Bracelin, who is lowering earnings per share estimates and raising revenue estimates after the report.

"Our model reboot last week proved to be too conservative and are encouraged that demand continues to outstrip supply," Bracelin said.

The analyst saw a second-half acceleration in Azure growth.

Accounting recognition of Microsoft's OpenAI investment could temporarily drag earnings per share figures, the analyst added.

Goldman Sachs on MSFT: The narrative on Microsoft's financials could shift from higher CapEx concerns to the AI revenue opportunity, Rangan said in a new investor note.

The analyst saw lower Azure growth guidance and the negative impact to earnings from the OpenAI accounting issues as short-term items.

"We don't believe the value added by the OpenAI relationship is being fully reflected in the current valuation, despite the stock bearing the expense load," Rangan said.

The analyst said investors should shift their focus from cost concerns for the OpenAI investment to the revenue opportunities.

Microsoft's build-out of Azure could also help the company's roadmap on how to work through high costs for a new product cycle, the analyst added.

"We believe Microsoft is one of the most compelling investment opportunities in the technology industry and across sectors."

MSFT Price Action: Microsoft stock is down 5.51% to $408.72 on Thursday versus a 52-week trading range of $339.66 to $468.35. Microsoft stock is up over 10% year-to-date in 2024.

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