UBS maintains Buy on Microsoft stock, price target at $510

On Friday, UBS analyst Karl Kierstead reaffirmed a Buy rating on Microsoft (NASDAQ:MSFT) stock, maintaining a price target of $510.00. This aligns with the broader Wall Street sentiment, as InvestingPro data shows 19 analysts have recently revised their earnings estimates upward, with price targets ranging from $420 to $650. During a recent visit to Microsoft's campus, a group of investors met with executives from Azure and M365, as well as the Investor Relations team. The discussions primarily centered on identifying the underlying reasons and the expected timeframe for resolving the slowdown in the non-AI segments of Azure. Additionally, there was some interest in the trajectory of capital expenditures.

Kierstead noted that Microsoft did not provide detailed information about the go-to-market (GTM) strategy adjustments and seemed to minimize the significance of these changes, describing them as "mere tweaks." Despite this, Kierstead expressed that the current lack of clarity regarding the cause and resolution timeline for Azure's challenges might temporarily impact the stock's performance.

Kierstead believes that the long-term growth prospects for Microsoft remain strong. The enduring secular growth tailwinds support the analyst's positive stance on the stock. Recent InvestingPro data reinforces this view, showing impressive revenue growth of 15% over the last twelve months, with the company maintaining a robust gross profit margin of 69.4%. Kierstead's commentary suggests that while there may be short-term concerns, the overall outlook for Microsoft is favorable, underpinning the Buy rating and $510 price target.

Microsoft's Azure platform has been a significant growth driver for the company, with its cloud services competing in a market dominated by major players like Amazon (NASDAQ:AMZN) Web Services (AWS) and Google (NASDAQ:GOOGL) Cloud. The attention given to Azure's non-AI deceleration reflects the importance of cloud services in Microsoft's overall business strategy.

The company's stock performance will likely continue to be influenced by its ability to address the current issues with Azure and execute its GTM strategy effectively. Investors will be watching closely for any further updates from Microsoft regarding their plans to remedy the Azure deceleration and the impact of these efforts on the company's financials. For investors seeking deeper insights, InvestingPro offers a comprehensive Pro Research Report with detailed analysis of Microsoft's financial health, which currently rates as GOOD with a score of 2.86, along with over 30 additional exclusive ProTips and metrics.

In other recent news, Elon Musk's AI venture, xAI, is set to launch Grok 3, a chatbot that has outperformed existing AI models in tests. Concurrently, Musk and a group of investors have bid $97.4 billion to acquire the nonprofit assets of OpenAI. Meanwhile, OpenAI has made significant updates to its Model Spec, a document outlining the desired behavior of its AI models, emphasizing customizability, transparency, and intellectual freedom. OpenAI CEO, Sam Altman, has also shared updates on the lab's roadmap for its next iterations, GPT-4.5 and GPT-5.

Altman dismissed Musk's unsolicited bid for OpenAI as a delay tactic, suggesting Musk is attempting to stall OpenAI's progress. OpenAI has been working on a unified intelligence system, aiming to simplify its product offerings and enhance user experience. This development comes as OpenAI faces competition from DeepSeek's new model, R1, which Barclays (LON:BARC) reported as rivaling OpenAI's o1 model in performance.

Barclays also noted a decline in retention rates for monthly subscriptions of OpenAI's ChatGPT following the release of DeepSeek's R1 model. These developments indicate a dynamic and evolving landscape in the field of artificial intelligence, with major players like Musk and OpenAI making significant strides and facing new competition.

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