Microsoft (NASDAQ:MSFT) will be joining the June quarter earnings shenanigans next week, with the tech giant set to report FQ4 results next Wednesday (July 30). Sentiment around the company appears positive right now, with the stock currently sitting a hair away from the all-time high reached just last week.
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There’s no reason for that sentiment to shift, appears to be the opinion of Morgan Stanley’s Keith Weiss, an analyst ranked amongst the top 2% of Wall Street stock experts.
That’s because Weiss thinks Microsoft looks “poised to yield across a broadening swathe of its GenAI investments and solution sets,” which should help drive market share gains and sustained growth. Coupled with the company’s continued strong discipline on operating expenses, Weiss is increasingly confident in the company’s ability to deliver a solid total return in the mid-to-high teens over the coming years. “On the back of this conviction,” says the 5-star analyst, “we see an attractive risk/reward for this GenAI winner.”
In FQ3, Microsoft beat expectations across all segments, delivering a 2% revenue beat with no signs of macro-driven demand weakness. Azure grew 35% in constant currency – well above the 31% expected – and accelerated by four points quarter-over-quarter. The FQ4 guide topped revenue estimates, with Azure expected to maintain 34–35% growth, and EPS in line with consensus.
Weiss thinks that Azure growth of ~36% i(n constant currency) in FQ4 with a 34-35% cc Q1 Azure guide “likely keeps this key revenue growth driver in good standing and sets up Microsoft well for double-digit total revenue growth in FY26.” An opex rise in the low-to-mid single-digit range could help offset any gross margin pressure and support double-digit operating income growth in FY26.
Weiss says channel partners “sounded positive” about Azure’s CQ2 performance and outlook, citing strong momentum in cloud migrations and “Azure AI penetration.” Recent changes to Microsoft’s partner incentive structure appear to have improved “go-to-market execution” across the board, including non-AI services, helping drive stronger uptake through the company’s scalable sales approach known as ‘Scale Motion.’ “All in,” Weiss said, “our conversations pointed to solid performance on both AI and non-AI Azure, as Azure continues to be positioned well according to partners, with robust willingness from end-users to invest in cloud deployments/migrations across upper mid-market/enterprise organizations, as well as incremental interest around the company’s AI partnerships – particularly OpenAI Services.”
So, what does this all ultimately mean for investors? Weiss maintained an Overweight (i.e., Buy) rating along with a $530 price target, implying the shares will post growth of 6% in the months ahead. (To watch Weiss’s track record, click here)
Most of Weiss’s colleagues are thinking along the same lines; 30 others join him in the bull camp while an additional 3 Holds can’t detract from a Strong Buy consensus rating. The forecast calls for one-year returns of 10%, considering the average target clocks in at $550.63. (See Microsoft stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.