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On Thursday, RBC Capital Markets maintained their Outperform rating on Microsoft Corporation (NASDAQ:MSFT) and increased the price target from $500.00 to $525.00. The decision followed Microsoft’s robust third-quarter financial results for the fiscal year 2025, which saw the company’s shares surge 7% in after-hours trading. According to InvestingPro data, Microsoft maintains a "GREAT" overall financial health score, with particularly strong marks in profitability (4.29/5) and growth (3.16/5).
Microsoft’s cloud computing service, Azure, reported a 33% growth, exceeding analysts’ expectations, with currency constant (cc) growth at 35%. The company also experienced a significant uptick in AI services revenue, contributing 16 percentage points to the overall growth. Both revenue and profitability surpassed Wall Street estimates, with positive results across all divisions. The company’s impressive performance is reflected in its 15% year-over-year revenue growth, reaching $261.8 billion in the last twelve months, with a robust gross profit margin of 69.4%.
RBC Capital analysts highlighted Microsoft’s effective execution within its core Azure business, excluding AI, and noted that issues with capacity constraints appear to be resolving. The analysts expressed their continued optimism about the risk/reward balance for Microsoft’s stock, prompting the increase in their price target. InvestingPro reveals that analyst consensus remains strongly bullish, with price targets ranging from $415 to $650, suggesting potential upside. Discover 12 more exclusive ProTips and comprehensive analysis in the Pro Research Report.
The performance of Microsoft’s Azure platform, particularly its AI services, has been a key factor in the company’s recent success. The strong financial results and the subsequent rise in the stock’s price target reflect the company’s ongoing growth trajectory and its ability to exceed market expectations.
Investors reacted positively to the news, with Microsoft’s stock price reflecting the confidence in the company’s current strategy and future potential. The updated price target by RBC Capital Markets underscores their belief in the strength and continued growth of Microsoft’s offerings in the competitive cloud computing market.
In other recent news, Microsoft reported impressive fiscal Q1 2025 earnings, surpassing analysts’ expectations with earnings per share of $3.46 and total revenue of $70.1 billion. This performance was largely driven by strong demand for Microsoft’s cloud and AI services. Following these results, several analyst firms adjusted their outlooks for the company. Stifel raised its price target for Microsoft to $500, citing robust Azure growth, while DA Davidson also increased its target to $500, acknowledging the company’s 13.3% year-over-year revenue growth. Raymond (NSE:RYMD) James raised its price target to $490, highlighting Azure’s performance and the strength of non-AI business segments. KeyBanc, however, maintained a Sector Weight rating due to concerns about AI investment returns and associated costs. Despite this, Microsoft’s management emphasized their ability to control operating expenses, with only a 3% year-over-year increase, indicating efficient cost management. These developments reflect a strong market confidence in Microsoft’s strategic direction and growth potential in cloud computing and AI technologies.
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