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On Thursday, Jefferies analyst Brent Thill increased the price target for Microsoft stock (NASDAQ:MSFT) to $550, up from the previous $475, while reiterating a Buy rating on the shares. The tech giant, currently valued at $2.94 trillion, maintains a GREAT financial health score according to InvestingPro data, though it trades at a relatively high P/E ratio of 31.3x. Thill highlighted Microsoft’s strong performance in the third fiscal quarter, noting that the company exceeded expectations with robust results and provided a revenue forecast for the fourth fiscal quarter that was two percentage points ahead of consensus for the first time in six quarters.
The analyst pointed out that Microsoft has observed consistent demand signals extending into April. Azure, Microsoft’s cloud computing service, saw a year-over-year constant currency growth of 35% in the third fiscal quarter, which was three percentage points above the high end of the company’s guidance. This impressive performance aligns with Microsoft’s overall revenue growth of 15% year-over-year. For deeper insights into Microsoft’s growth metrics and 12+ exclusive ProTips, check out InvestingPro. This outperformance was primarily attributed to non-AI (artificial intelligence) segments, while the guidance for the fourth fiscal quarter suggests only a one percentage point deceleration at the lower end.
Thill also mentioned that AI capacity is expected to remain tight throughout the fourth fiscal quarter as demand for AI continues to surpass expectations. Microsoft’s sustained demand and growth in key areas have led Thill to reiterate the stock as a Top Pick. The positive outlook reflects the analyst’s confidence in Microsoft’s performance and market position as it continues to capitalize on the growing demand for cloud and AI solutions. Wall Street appears to share this optimism, with analyst price targets ranging from $415 to $650, and a Strong Buy consensus recommendation.
In other recent news, Microsoft Corporation has seen a series of positive developments, particularly in its financial performance and analyst outlooks. The company reported strong earnings results, with Azure, its cloud computing service, showing a 33% year-over-year growth, surpassing analysts’ expectations. This growth is partially driven by a significant contribution from artificial intelligence technologies. Microsoft has also provided forward-looking guidance for Azure’s revenue growth, projecting a 34-35% year-over-year increase for the upcoming quarter, which is above consensus estimates.
Following these results, several analyst firms have raised their price targets for Microsoft. RBC Capital Markets increased its target from $500 to $525, while Stifel raised theirs to $500, citing Azure’s impressive performance and efficient expense management. Wedbush Securities went further, lifting their target to $515, emphasizing the role of AI in Microsoft’s growth strategy. Meanwhile, BMO Capital Markets adjusted their target to $485, maintaining an Outperform rating due to the company’s robust cloud services and AI demand.
Despite these positive assessments, KeyBanc maintained a Sector Weight rating, citing concerns about AI investment returns and cost management. Nonetheless, Microsoft’s ongoing investments in AI and cloud infrastructure, along with its strategic focus on efficiency, have been key factors in its recent success. Investors and analysts alike are closely monitoring Microsoft’s continued trajectory in the competitive tech landscape.
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