VUSI

Microsoft Corp. (NASDAQ:MSFT) remains in focus after stronger-than-expected quarterly results and guidance reinforced confidence in Azure and enterprise software growth, while analysts continue to debate the scale and returns of its AI infrastructure spending.

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Slowinski Raises Target On Azure Acceleration

BNP Paribas analyst Stefan Slowinski maintained an Outperform rating on Microsoft and raised his price forecast to $632 from $604, citing stronger Azure growth and better visibility into revenue acceleration.

Slowinski said Microsoft’s fiscal first-quarter results showed AI-driven growth at scale, with Azure revenue rising 48% in constant currency, above company guidance of 44%-45% and roughly 47% buy-side expectations. Microsoft 365 Commercial Cloud grew 18% in constant currency.

He said Microsoft’s fiscal second-quarter outlook points to further acceleration, with Azure growth expected at 49%-50% and Microsoft 365 Commercial Cloud growth at 19% in constant currency.

Slowinski raised his fiscal 2027 revenue estimate by about 0.5%, driven by higher Azure growth assumptions. He also increased his fiscal 2028 and fiscal 2029 cash capex estimates by 9% and 16%, respectively, while slightly lowering EPS estimates to reflect higher assumed debt.

The analyst expects Microsoft to remain free-cash-flow positive in the first half of fiscal 2027, but said free cash flow could turn negative in the second half and remain limited in fiscal 2028 if the current capex trajectory continues.

Luria Sees Strong AI Funding Capacity

Ahead of the results, D.A. Davidson Managing Director Gil Luria slightly favored Microsoft over Alphabet and Amazon.

Luria expected Azure growth to accelerate and viewed Microsoft’s strong free cash flow as an advantage in funding AI infrastructure without necessarily relying on additional debt or equity.

Thill Highlights Azure and M365 Strength

Following the results, Jefferies analyst Brent Thill pointed to accelerating Azure and Microsoft 365 growth, strong remaining performance obligations and lower-than-expected capital spending as supportive of his outlook.

Thill said Microsoft’s next challenge is balancing continued AI infrastructure investment with growth and profitability. He also highlighted resilient operating margins and the early stage of enterprise AI adoption.

Munster Questions Software Growth Durability

Deepwater Asset Management’s Gene Munster said Microsoft’s software growth accelerated to 17% in September from 14% in June.

However, Munster questioned whether that pace is sustainable as AI changes demand for knowledge-work software. He also said capacity constraints limited Azure’s potential growth, reinforcing the need for continued infrastructure investment.

MSFT Price Action: Microsoft shares were down 1.22% at $524.52 at the time of publication on Thursday, according to Benzinga Pro data.

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