Strong Growth Despite PC Weakness
Analysts remain bullish on Microsoft (MSFT) despite a recent decline in PC sales. Citigroup's Tyler Radke maintains a Buy rating and lowered the price target to $475, citing strong Azure growth trends and continued cost discipline. BofA Securities' Brad Sills also reiterates a Buy rating with a $480 price target, expecting healthy revenue growth driven by Azure and M365.
Azure Growth: Both analysts expect continued strong growth in Azure, with Sills anticipating a 1% upside to his estimate of 28.0% cc growth. This is driven by positive feedback from system integrator partners and increasing usage of Azure AI and the Microsoft security stack.
Sills expects a $220 million upside to his PBP segment revenue estimate due to better Commercial Office growth, driven by higher ASPs and early traction with M365 Copilot.
Sills expects a $50 million downside to his MPC revenue estimate due to weaker PC sales in the first quarter.
Sills believes the next AI catalyst for Microsoft will be incremental growth metrics such as M365 Copilot users or accelerating Commercial Office ASP. He sees the stock as a top pick in software, with the potential to compound at the FCF growth rate in the coming quarters.
Overall, analysts remain positive on Microsoft's long-term prospects despite near-term headwinds in the PC market. Strong growth in Azure and M365, coupled with continued cost discipline, are expected to drive earnings and share price appreciation.
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