Microsoft ($MSFT) is poised to announce impressive results for its fiscal fourth quarter, significantly exceeding market expectations, primarily driven by the robust performance of its cloud computing platform, Azure, alongside momentum in artificial intelligence (AI) technologies, according to insights from Wedbush Securities published on Monday. The brokerage's investigations suggest a particularly strong quarter, propelled by an increase in cloud deal flow.
This surge is anticipated to enhance Azure's growth trajectory significantly through the latter half of the calendar year 2024 and into 2025, reflecting an evolving landscape in technology adoption and integration. Analyst Daniel Ives from Wedbush has reaffirmed a favorable outperform rating for Microsoft, alongside a substantial price target of $550 per share, indicating confidence in the company's performance.
Microsoft, headquartered in Redmond, continues to feature prominently on the brokerage's list of top investment ideas. Investors are eagerly awaiting the results scheduled for release after market hours on Tuesday. Expectations from analysts suggest that Microsoft will surpass consensus projections, which Ives estimates to be around $64.37 billion in revenue and $2.93 earnings per share.
A critical aspect of the forthcoming quarterly report will focus on the growth metrics of the Azure platform, an essential driver of the company's overall performance. Ives noted an intriguing correlation, stating, "For every $100 spent on Azure cloud services over recent years, it has led to an additional $40 investment in AI by Microsoft looking forward." This emphasizes the intertwined growth potential of cloud services and AI capabilities. Highlighting the significance of this technological advancement, Ives refers to this juncture as Microsoft's 'iPhone Moment', where AI is poised to revolutionize the trajectory of cloud growth in Redmond over the coming years.
Furthermore, recent checks conducted by the brokerage provide increased confidence in this transformative dynamic. Ives predicts that within the next three years, more than 70% of Microsoft's established user base will ultimately transition to utilizing AI-driven functionalities for both enterprise and commercial applications. Ives elaborated, stating, "We believe the stock has not yet fully accounted for what we perceive as the forthcoming wave of growth in cloud services and AI advancements." The analyst forecasted that Copilot, Microsoft's generative AI chatbot, has the potential to contribute an additional $25 billion to the company's revenue by fiscal 2025.
This addition is expected to position the cloud services, along with the essential Office 365 and Windows ecosystem, as an increasingly significant percentage of total revenue, stimulating rapid growth and enhancement in profit margins moving forward. Stock Price: $427.25, Change: +1.98, Percent Change: +0.47 $MSFT.