Microsoft stock rating upgraded to Overweight by KeyBanc on Azure growth

Investing.com - KeyBanc upgraded Microsoft (NASDAQ:MSFT) from Sector Weight to Overweight on Thursday, setting a price target of $630.00. The tech giant, currently trading at $513.24 and near its 52-week high of $518.29, has demonstrated strong momentum with a 24% return over the past six months.

The upgrade follows significant acceleration in Microsoft’s Azure cloud segment, which grew 39% in constant currency by the end of the fiscal year, up from 31% in January and 35% in March—an eight percentage point increase over the second half.

Azure outperformed KeyBanc’s expectations in recent quarters, delivering approximately $500 million and $700 million in upside to guidance in the last two reporting periods, respectively.

KeyBanc had previously downgraded Microsoft in April due to concerns about capital expenditure and depreciation expenses potentially affecting gross margins, along with skepticism about the company’s ability to manage headcount to protect profitability.

Since KeyBanc’s earlier concerns about operating expenses, Microsoft has laid off over 10,000 employees, and the company’s earnings call contained no material mentions of macroeconomic headwinds that analysts had previously feared would impact Microsoft more than other companies in the sector.

In other recent news, Microsoft reported its fourth-quarter earnings for fiscal year 2025, exceeding Wall Street expectations. The company achieved earnings per share of $3.65, surpassing the forecasted $3.37. Revenue reached $76.4 billion, beating analysts’ estimates of $73.79 billion. This performance was driven by strong growth in Microsoft’s cloud and AI businesses. Barclays (LON:BARC) responded to these results by raising its price target for Microsoft from $550 to $625, while maintaining an Overweight rating on the stock. The firm noted the company’s 3.5% revenue beat and 7% operating profit beat, with margins ahead by approximately 180 basis points. These recent developments highlight Microsoft’s robust financial performance and positive outlook according to analysts.

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