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On Thursday, Mizuho (NYSE:MFG) Securities adjusted its outlook on Microsoft Corporation (NASDAQ:MSFT), reducing the tech giant’s price target from $510 to $500 while maintaining an Outperform rating. The revision reflects a mix of challenges and positive developments in the company’s performance. According to InvestingPro data, Microsoft is currently trading near its 52-week high of $468.35, with analysts’ targets ranging from $420 to $650.
Microsoft’s Azure cloud service reported a year-over-year constant currency revenue growth of 31%, hitting the low end of the management’s guidance range of 31-32%. This performance was attributed to less-than-ideal go-to-market (GTM) execution outside of AI initiatives. Additionally, Microsoft’s third fiscal quarter (F3Q) revenue guidance fell short of Wall Street’s expectations, influenced by an approximately $1 billion foreign exchange headwind. The company has maintained strong overall revenue growth of 16.4% over the last twelve months, according to InvestingPro data.
Despite Azure’s growth aligning with the directional acceleration anticipated by investors, the actual growth for F3Q did not meet the high expectations set following the second fiscal quarter’s (F2Q) underperformance. The GTM challenges are expected to continue into the second half of the fiscal year.
Encouragingly, Microsoft’s management has raised its fiscal year 2025 operating margin (OM) forecast, signaling confidence in the company’s profitability outlook. Mizuho analysts expressed optimism about Microsoft’s medium-term revenue growth potential and its ability to leverage tangible GenAI adoption and monetization. The firm remains bullish on Microsoft’s prospects and continues to recommend the stock as one of its top picks for the calendar year 2025, albeit with a slightly adjusted price target. InvestingPro analysis shows Microsoft maintains an impressive "GREAT" overall financial health score, with particularly strong marks in profitability. For deeper insights into Microsoft’s valuation and growth prospects, including 14 additional ProTips and comprehensive financial metrics, check out the full Pro Research Report.
In other recent news, Microsoft reported a second-quarter revenue of $69.6 billion, marking a 12% increase year-over-year. Microsoft’s commercial bookings saw a significant increase due to a commitment from OpenAI, contributing to a 33% year-over-year growth in remaining performance obligations. Goldman Sachs maintained a Buy rating on Microsoft’s stock and reiterated its $500 target, despite investor concerns over the growth pace of Microsoft’s Azure cloud services. On the other hand, JPMorgan, Morgan Stanley (NYSE:MS), and BofA Securities also maintained their Overweight and Buy ratings on Microsoft’s stock, albeit with varied price targets. These are recent developments in the technology sector.
Microsoft’s Azure growth for the second quarter was at the lower end of the guided range, with the third quarter guidance also below consensus. However, the company’s partnership with OpenAI has been seen as a positive signal, contributing significantly to commercial bookings. Microsoft anticipates maintaining similar capital expenditure levels for the next two quarters. The company’s strategy seems to be adapting to a potential shift in value from the large language model component to the application and infrastructure layers.
Amid these developments, analysts from different firms have shared their views. Goldman Sachs analysts anticipate a significant reduction in CapEx for fiscal year 2026 due to the front-loading of data center investments. Morgan Stanley reduced its price target for Microsoft to $530, citing concerns about increased foreign exchange headwinds and potential losses associated with OpenAI. DA Davidson holds a Neutral stance with a $425 target, and BofA Securities maintains a Buy rating with a $510 target.
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