5 Analysts Size Up Microsoft Shares After Q4 Earnings: 'In The Early Innings Of A Massive Penetration Of AI And Cloud'

Shares of Microsoft Corp MSFT are trading lower Wednesday after the company reported fourth-quarter financial results after market close Tuesday.

Analysts break down the highlights of the quarter and what’s ahead for the technology giant.

The Microsoft Analysts: BMO analyst Keith Bachman had an Outperform rating and raised the price target from $385 to $400.

RBC Capital Markets analyst Rishi Jaluria had an Outperform rating and raised the price target from $350 to $390.

Wedbush analyst Daniel Ives had an Outperform rating and raised the price target from $375 to $400.

Needham analyst Ryan Koontz had no rating on the stock.

Piper Sandler analyst Brent Bracelin had an Overweight rating and a price target of $400.

BMO on Microsoft: A trend of Azure growth deceleration in the fourth quarter could continue in future quarters, Bachman said.

“Azure growth was 27% year-over-year constant currency, at the high end of guidance and in line with our estimates, but we had suspected modest upside tensions more so that an in-line print, and we think investors did as well,” Bachman said.

The analyst said upside was driven by non-Azure businesses.

Bachman sees artificial intelligence growth could benefit the company going forward.

Related Link: Trading Strategies For Microsoft Stock After Q4 Earnings 

RBC on Microsoft: The fourth quarter saw solid results and solid guidance, Jaluria said.

The analyst said cloud optimization headwinds remain, but artificial intelligence is very much a second-half story for the technology company.

“Shares were down 4% after market close likely due to investors being too optimistic on the timeline for cloud optimization headwinds to abate and AI tailwinds to kick in,” Jaluria said.

The analyst said the impact of artificial intelligence's contribution to revenue could be gradual.

“Stepping back, a clear path to reaccelerating cloud (and overall) remains fast-forming with AI. Shares look attractive at 29x 2024E GAAP EPS.”

Wedbush on Microsoft: Strength of the Azure cloud segment and commentary on artificial intelligence was bullish, according to Ives, who upgraded the price target on shares.

“The AI commentary was bullish as the MSFT currently has 11k enterprises on Azure OpenAI Service with a massive golden opportunity ahead for Redmond,” Ives said.

Ives said the selloff in shares wasn’t a huge surprise after the company said the AI ramp will be “gradual.”

“FY25 remains the true inflection year of AI growth with pricing, beta customers, and use cases all being rolled out over the next 3 to 6 months. We believe MSFT is in the early innings of a massive penetration of AI and cloud that could conservatively approach 50% of its global installed base over the next 3 years.”

Needham on Microsoft: The growth of Microsoft Teams is seen as a highlight from the fourth quarter results by Koontz.

“Management also conveyed upside revenue in E5 upgrade license in the Q, making Teams Phone sell-in even easier to those companies already paying the MSFT ‘phone tax’ included in E5. These numbers affirm our view that Teams is positioned to dominate UCaaS adds vs its peers,” Koontz said.

The analyst highlights commentary on Teams Phone rolling out in India and seeing increased international expansion.

Piper Sandler on Microsoft: The strength of cloud and artificial intelligence are the keys from the fourth quarter results for Bracelin.

“Microsoft Cloud accentuated by AI tailwinds continues to support our bullish stance on MSFT despite the +47% YTD move,” Bracelin said.

The analyst saw a first-mover advantage for Microsoft in generative artificial intelligence.

“The number of Azure OpenAI Service customers has more than doubled since May to 11,000+. As expected, MSFT is ramping up investment in cloud infrastructure to support cloud growth and demand for its AI platform.”

MSFT Price Action: Microsoft shares are down 4.25% to $336.08 on Wednesday versus a 52-week trading range of $213.46 to $366.78.

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