Reaffirming Microsoft Buy: Long-Term Azure and AI Monetization Outweighs Near-Term Growth Moderation

Analyst Karl Keirstead from UBS maintained a Buy rating on Microsoft and keeping the price target at $600.00.

Karl Keirstead has given his Buy rating due to a combination of factors tied to Microsoft’s cloud and AI positioning. Despite Azure and Microsoft 365 growth coming in slightly below his expectations, he views the overall results as strong, with solid revenue and earnings expansion. He highlights that Microsoft is aggressively adding cloud and GPU capacity, which, together with a very large and growing backlog, signals robust underlying demand, particularly for Azure. He also notes that newer AI-related contracts, including those involving key partners, appear to convert into Azure revenue faster than previously assumed, leading him to raise his longer-term Azure growth projections.

Karl Keirstead also points to Microsoft’s strategic decision to allocate more scarce GPU resources to its own products, including Copilot and proprietary AI models, as a deliberate long-term bet on monetizing AI across the portfolio, even if it temporarily dampens Azure’s growth rate. While he acknowledges investor skepticism around the near-term payoff from Copilot and in-house models, he believes the market underestimates the potential acceleration in Azure and the improving perception of Microsoft’s AI and partner exposure. When these growth drivers are set against Microsoft’s current valuation multiples, he judges the shares to be reasonably priced relative to their long-term earnings and cash flow potential. This valuation view supports his unchanged price target and underpins his continued Buy recommendation on the stock.

In another report released today, Morgan Stanley also maintained a Buy rating on the stock with a $650.00 price target.

Based on the recent corporate insider activity of 80 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of MSFT in relation to earlier this year.