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On Thursday, Stifel analysts increased their price target on Microsoft stock (NASDAQ:MSFT) to $500 from the previous $475, while maintaining a strong Buy rating. The revision comes after Microsoft demonstrated a solid performance, particularly in its Azure cloud services. According to InvestingPro data, Microsoft maintains an impressive "GREAT" financial health score, with analyst targets ranging from $415 to $650.
Microsoft’s recent financial results have been impressive, showing a return to form with a strong overall performance. As a prominent player in the Software (ETR:SOWGn) industry, the company achieved 15% revenue growth over the last twelve months, reaching $261.8 billion. Azure, the company’s cloud computing service, experienced growth that was 300 basis points above the top end of the company’s guidance. This surge was attributed to robust enterprise demand in the non-AI segments, slight improvements in scale motions that had previously been problematic, and a significant contribution from AI, which saw a year-over-year increase of around 170%.
The ability of Microsoft’s management to control operating expenses (OPEX) was another highlight noted by Stifel analysts. Despite the company’s growth, year-over-year expenses increased by only 3% on a constant currency basis, with headcount growth reported at 2%, indicating a quarter-over-quarter decline. Microsoft’s efficiency in managing expenses is particularly noteworthy given its large workforce of 230,000 employees.
Senior management at Microsoft has been focused on maintaining efficiency, a trend that Stifel analysts expect to continue. This is significant as the company aims to balance the gross-margin impact resulting from its capital expenditure investments. However, due to the increased demand, Microsoft anticipates that it will not achieve a supply/demand equilibrium in its AI offerings until the fiscal year 2026.
Investors and industry watchers are keeping a close eye on Microsoft’s strategic moves, especially as the company continues to invest heavily in cloud computing and AI technologies. The updated price target from Stifel reflects confidence in Microsoft’s trajectory and its ability to sustain growth and manage expenses effectively. For deeper insights into Microsoft’s valuation and growth prospects, InvestingPro subscribers can access 12 additional key tips and a comprehensive Pro Research Report, part of the platform’s coverage of over 1,400 US stocks.
In other recent news, Microsoft Corporation reported its fiscal Q1 2025 earnings, surpassing analysts’ expectations with an earnings per share (EPS) of $3.46, compared to a forecast of $3.23. The company also exceeded revenue forecasts, reporting $70.1 billion against an anticipated $68.53 billion, driven by strong demand for cloud and AI services. DA Davidson raised Microsoft’s stock price target to $500 from $450, maintaining a Buy rating, citing robust growth across all business segments. Raymond (NSE:RYMD) James also increased Microsoft’s stock price target to $490 from $480, retaining an Outperform rating, highlighting Azure’s strong performance and the growing contribution of AI. Microsoft Cloud revenue grew by 20-22% in constant currency, with notable increases in search and news advertising revenues, which are now growing at 23% year-over-year. The company introduced innovations such as the Majorana One quantum computing initiative and reported that its Microsoft Fabric analytics consumption soared by 80% year-over-year. Looking forward, Microsoft projects continued growth in its Productivity and Business Processes and Intelligent Cloud segments, while anticipating a decline in More Personal Computing revenue. These developments reflect continued confidence in Microsoft’s growth trajectory and diverse business portfolio.
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