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On Thursday, Wedbush Securities increased its price target for Microsoft stock (NASDAQ:MSFT) to $515 from the previous $475, while maintaining an Outperform rating. The adjustment follows Microsoft’s report of a robust financial performance, particularly noting the significant role of artificial intelligence (AI) in driving the company’s growth. According to InvestingPro data, Microsoft maintains a "GREAT" financial health score, with the company’s market capitalization standing at $2.94 trillion. The stock is currently trading near its Fair Value based on comprehensive analysis.
Microsoft’s recent earnings surpassed expectations, with a notable 33% year-over-year growth in Azure revenue, outpacing the anticipated 31%. AI contributed approximately half of this growth, indicating Microsoft’s successful leverage of AI technologies within its offerings. The company’s forward-looking guidance for the fourth fiscal quarter of 2025 also came in stronger than analysts had predicted. Overall revenue growth stands at 15.04% over the last twelve months, with an impressive gross profit margin of 69.41%.
The tech giant’s emphasis on AI is not only evident in its product enhancements but also in its investment strategies. Microsoft is continuing to increase its capital expenditures quarter over quarter, supporting its AI monetization strategy within its cloud services. The firm has reaffirmed its $80 billion guidance for fiscal year 2025 and anticipates further growth in capital expenditures going into fiscal year 2026.
This financial commitment is aligned with Microsoft’s ongoing data center expansions, which are crucial for maintaining the momentum in demand for its services. Despite previous rumors about potential cancellations of data center projects, the company has clarified its intentions to proceed with these critical investments.
Wedbush’s analyst highlighted Microsoft’s ability to drive efficiencies across workloads, which has been central to the company’s strong performance. The continued expansion and investment in AI and cloud infrastructure are expected to support Microsoft’s growth trajectory in the competitive tech landscape.
In other recent news, Microsoft Corporation reported strong third-quarter financial results for fiscal year 2025, with total revenue reaching $70.1 billion, a 13.3% year-over-year increase that surpassed market expectations. The company’s cloud computing service, Azure, played a pivotal role in this performance, reporting a 33% growth, exceeding analysts’ expectations and contributing significantly to the overall revenue. Microsoft’s AI services also saw substantial growth, contributing 16 percentage points to Azure’s performance. Analyst firms have responded positively, with RBC Capital Markets raising Microsoft’s price target to $525, and Stifel and DA Davidson both increasing their targets to $500, citing robust Azure growth and effective expense management. Raymond (NSE:RYMD) James also lifted its target to $490, highlighting the strength of Microsoft’s diverse business portfolio, including Gaming and Advertising. However, KeyBanc maintained a Sector Weight rating, expressing caution about AI investment returns and potential costs. Microsoft’s management provided guidance for the next quarter, projecting various growth rates across its segments, with continued strong demand expected in AI and cloud services.
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