Microsoft (NASDAQ:MSFT) will be among several of the market’s heavy hitters reporting December quarter earnings this week, with investors hoping the readout could bring about a shift in sentiment.
Claim 50% Off TipRanks Premium
- Unlock hedge fund-level data and powerful investing tools for smarter, sharper decisions
- Stay ahead of the market with the latest news and analysis and maximize your portfolio's potential
Despite delivering a strong report last time around in its fiscal first quarter (September quarter) with plenty of demand for Azure on display, sentiment has turned negative as concerns over AI and cloud competition have weighed on the stock.
As such, heading into the FQ2 print, slated for Wednesday (Jan. 28) after the market closes, Morgan Stanley’s Keith Weiss – an analyst who ranks among the top 5% on Wall Street – believes the report could act as a “positive catalyst” for the shares. Weiss thinks that by showing the company can maintain top-line momentum, supported by a wide-ranging portfolio “aligned to key CIO priorities and secular trends,” it will once again demonstrate its ability to create a “diverse set of powerful growth drivers.”
Keiss expects Microsoft to execute across its expanding Azure offerings, GenAI investments, and broader platform capabilities, supporting share gains and sustainable growth. Combined with continued disciplined operating expense management, he sees a “durable high-teens total return profile” for the company over the coming years.
Meanwhile, Weiss’s recent discussions with executives across Microsoft’s businesses reinforced his view that strong demand – beyond just OpenAI – will drive sustainable mid-teens top-line growth and ongoing returns on investment, supporting “continued operating margin expansion going forward.”
Microsoft’s previous quarter impressed across the board, surpassing consensus in all three business segments and delivering a 3% total revenue beat. Azure growth of 39%cc comfortably exceeded expectations of 37%cc. Looking ahead, the Q2 topline guide came in ahead of consensus, with Azure expected to maintain 37%+ cc growth.
Weiss believes Q2 Azure growth of roughly 40% cc, with Q3 guidance of 38–39% cc will keep this “key revenue growth driver” on track to support mid-teens total revenue growth for FY26. Such a target, says Weiss, is plausible, given consistently strong channel checks, a leading position in CIO survey data, and – perhaps most importantly in the current environment – rising AI compute capacity, giving confidence in high-30% growth for F2Q26 and low-to-mid 30% growth in the second half of FY26, despite tougher year-over-year comps.
“The 40% cc investor bogey is achievable, and this 3pt beat versus guidance would represent a strong outcome for MSFT shares,” the 5-star analyst went on to say.
Trading at roughly 23x CY27 GAAP EPS, Weiss thinks Microsoft’s shares do not fully reflect a sturdy high-teens total return potential, thereby highlighting an “attractive risk/reward” profile.
Accordingly, this “GenAI winner” gets an Overweight (i.e., Buy) rating from Weiss, while his $650 price target points toward one-year share appreciation of 38%. (To watch Weiss’s track record, click here)
That take gets plenty of backing elsewhere on the Street; with an additional 32 Buys overpowering 2 Holds, the analyst consensus rates this stock a Strong Buy. The forecast calls for 12-month returns of 32%, considering the average target clocks in at $622.14. (See MSFT stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
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.