Microsoft Analysts Weigh Azure Weakness Against AI Strength: 'Most Compelling Investment Opportunities'

Microsoft Corporation MSFT analysts balance the positives and negatives of Azure’s weakness and strength in AI from the company’s quarterly financial results.

The Microsoft Analysts:

Morgan Stanley analyst Keith Weiss maintained an Overweight rating on Microsoft and lowered the price target from $540 to $530.
Bank of America analyst Brad Sills reiterated a Buy rating with a $510 price target.
DA Davidson analyst Gil Luria maintained a Neutral rating with a $425 price target.
Raymond James analyst Andrew Marok reiterated an Outperform rating with a $480 price target.
RBC Capital analyst Rishi Jaluria maintained an Outperform rating with a $500 price target.
JPMorgan analyst Mark Murphy maintained an Overweight rating with a $465 price target.
Truist analyst Joel Fishbein reiterated a Buy rating with a $600 price target.
Piper Sandler analyst Brent Bracelin maintained an Overweight rating with a $520 price target.
Goldman Sachs analyst Kash Rangan maintained a Buy rating with a $500 price target.

Morgan Stanley on MSFT: Microsoft is "working to find the right balance," Weiss said in a new investor note.

"While Azure was disappointing, strength in the GenAI ramp vs moderating capex growth should support accelerating FY26 FCF growth," Weiss said.

The analyst said commercial bookings growth was ahead of expectations, helping offset Azure weakness.

Microsoft showed evidence of Azure product cycles and M365 copilot product cycles performing and driving better growth, Weiss added.

"We believe MSFT represents an attractive risk/reward for a leading secular growth franchise."

Bank of America on MSFT: Sills called the Microsoft quarterly results mixed with strong AI and cloud demand alongside the "rare execution challenges" for Azure.

"No change to view that Microsoft represents an AI winner in both apps and infrastructure."

The analyst said the Azure issues are fixable, but growth could continue to be impacted in the coming quarters.

DA Davidson on MSFT: Luria said Microsoft reported stable performances across all three business segments in a new investor note.

"While demand for its AI services remain heightened, core Azure services continue to decelerate, which is leading management to pull its previous guidance of a second half reacceleration of Azure revenue," Luria said.

The analyst said Microsoft is guiding towards flat capex, which means it is "still planning more capex for less growth."

Raymond James on MSFT: The quarter had a solid contribution from AI while the timeline for Azure to reaccelerate has been extended, Marok said in a new investor note.

"Overall, this quarter will go down as a disappointment, not due to any revisions on the scale of the AI opportunity but more due to the timing of capitalization on these trends," Marok said.

The analyst said the positives in the quarter were M365 commercial cloud growth, AI contribution commentary, search and advertising growth, the margin outlook and a solid quarter for gaming content and services.

RBC Capital on MSFT: Jaluria highlighted the weakness of Azure in a new investor note, but sees positives from Microsoft in other areas.

"Revenue was decent outside of Azure, but F3Q revenue was guided below consensus and EPS came in ahead," Jaluria said.

The analyst said Azure AI results were also strong and exceeded expectations.

"We see an upward revision path for estimates, and would be buyers of weakness."

JPMorgan on MSFT: Azure weakness overshadowed a commercial bookings boom in the quarter, Murphy said in a new investor note.

The analyst said the commercial bookings is likely attributable to OpenAI.

"This, in turn, should help to assuage recent investor concerns relating to the Stargate project and whether Microsoft's relationship with OpenAI might have changed adversely," Murphy said.

Murphy said the AI portion of Azure is "quite healthy."

Truist on MSFT: Fishbein said Microsoft's quarter saw Azure as a disappointment while artificial intelligence shined through in a new investor note.

"There were significant bright spots in their AI strategies gaining traction underscored by the announcement that their AI business now exceeds $13B," Fishbein said.

The analyst said the positive momentum of AI could "lead to a reacceleration" for Microsoft revenue.

Piper Sandler on MSFT: Bracelin said the Azure results overshadow the potential AI upside from the quarter.

"There are few $160B+ run-rate business models (Microsoft Cloud + AI) growing 20%+ y/y capable of sustaining a high-margin operating model in excess of 40%+," Bracelin said.

The analyst said investors are focusing too much on Azure and should focus on the big price and "add to positions on weakness."

"The big picture takeaway for us was that MSFT is at the steepest part of the AI investment cycle yet operating margins were guided up y/y and EPS remain poised for double-digit growth."

Goldman Sachs on MSFT: Concerns on Azure growth "remain significant for investors," Rangan said in a new investor note.

The analyst said Azure uncertainty could be overshadowing improvements in Capex and earnings per share guidance.

"As Microsoft continues to bring capacity online, prioritizes AI opportunities, and improves execution around Azure more broadly, there remains a possibility that Azure growth could re-accelerate F4Q25," Rangan said.

Rangan said Microsoft is well positioned to capitalize on several secular trends like GenAI, cloud consumption, SaaS and digital transformation with its strong presence in place.

"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 6% to $415.72 on Thursday versus a 52-week trading range of $385.58 to $468.35. Microsoft stock is up 1.5% over the last year.

Read Next: