Microsoft Stock Soars: Analyst Predicts Azure AI Boom
Microsoft Stock Soars on Azure AI Boom Prediction
NEW YORK (April 1, 2025) — Microsoft (MSFT) stock is experiencing a surge following a strong first-quarter performance and a bullish prediction from RBC Capital Markets analyst Rishi Jaluria. Jaluria added Microsoft to his "Top Picks" list, citing underestimation of the company's generative AI innovation across its infrastructure and applications. He believes Azure's growth will reaccelerate due to AI momentum, increasing online capacity, and a positive "AI halo effect."
Jaluria's optimism stems from Microsoft's market leadership in enterprise software and public cloud services via Azure. He projects a low-teens compound annual growth rate (CAGR) for Microsoft from fiscal year 2025 to fiscal year 2026, driven by expansion into new markets like hyperautomation and continued growth of its Office installed base. He assigned Microsoft a $500 price target, representing a roughly 33% upside from current levels, and an Outperform rating. This target aligns with the average among analysts covering Microsoft; 91% of 58 analysts rate the stock a Strong Buy or Buy, according to Yahoo Finance data.
Despite Microsoft's first-quarter underperformance—a 12% decline, making it the fourth-worst performer among the "Magnificent Seven" tech giants—Jaluria views this as a buying opportunity. The first-quarter sell-off was attributed to several factors: a shift by investors from large-cap tech to perceived safe-haven assets like gold and healthcare stocks amid concerns over Trump-era tariffs; apprehension about a potential slowdown in AI investment in 2025 following DeepSeek's breakthrough; and slightly weaker-than-expected fourth-quarter results, with Commercial Cloud sales ($40 billion) and intelligent cloud revenue ($25.5 billion) falling short of Wall Street projections.
However, AMD CEO Lisa Su's recent statement regarding immense and persistent demand for computing power suggests that concerns over slowing AI investment might be overstated. Microsoft's significant investments in AI infrastructure, notably its backing of OpenAI, are also seen as a positive indicator. The company's second-quarter fiscal 2025 results showed 12% revenue growth to $69.6 billion and a 17% increase in operating income to $31.7 billion, with Azure cloud services revenue surging 31% and the dedicated AI business reaching a $13 billion annual run rate. Microsoft's fiscal 2025 revenue is projected at $276.07 billion, indicating 12.62% year-over-year growth. Investors will have further insight when Microsoft reports earnings in late April. While Microsoft's AI expansion is impressive, some analysts recommend patience, awaiting valuation adjustments before significantly increasing positions, given current valuations and competitive pressures from companies like Google, Nvidia, and Amazon.
NEW YORK (April 1, 2025) — Microsoft (MSFT) stock is experiencing a surge following a strong first-quarter performance and a bullish prediction from RBC Capital Markets analyst Rishi Jaluria. Jaluria added Microsoft to his "Top Picks" list, citing underestimation of the company's generative AI innovation across its infrastructure and applications. He believes Azure's growth will reaccelerate due to AI momentum, increasing online capacity, and a positive "AI halo effect."
Jaluria's optimism stems from Microsoft's market leadership in enterprise software and public cloud services via Azure. He projects a low-teens compound annual growth rate (CAGR) for Microsoft from fiscal year 2025 to fiscal year 2026, driven by expansion into new markets like hyperautomation and continued growth of its Office installed base. He assigned Microsoft a $500 price target, representing a roughly 33% upside from current levels, and an Outperform rating. This target aligns with the average among analysts covering Microsoft; 91% of 58 analysts rate the stock a Strong Buy or Buy, according to Yahoo Finance data.
Despite Microsoft's first-quarter underperformance—a 12% decline, making it the fourth-worst performer among the "Magnificent Seven" tech giants—Jaluria views this as a buying opportunity. The first-quarter sell-off was attributed to several factors: a shift by investors from large-cap tech to perceived safe-haven assets like gold and healthcare stocks amid concerns over Trump-era tariffs; apprehension about a potential slowdown in AI investment in 2025 following DeepSeek's breakthrough; and slightly weaker-than-expected fourth-quarter results, with Commercial Cloud sales ($40 billion) and intelligent cloud revenue ($25.5 billion) falling short of Wall Street projections.
However, AMD CEO Lisa Su's recent statement regarding immense and persistent demand for computing power suggests that concerns over slowing AI investment might be overstated. Microsoft's significant investments in AI infrastructure, notably its backing of OpenAI, are also seen as a positive indicator. The company's second-quarter fiscal 2025 results showed 12% revenue growth to $69.6 billion and a 17% increase in operating income to $31.7 billion, with Azure cloud services revenue surging 31% and the dedicated AI business reaching a $13 billion annual run rate. Microsoft's fiscal 2025 revenue is projected at $276.07 billion, indicating 12.62% year-over-year growth. Investors will have further insight when Microsoft reports earnings in late April. While Microsoft's AI expansion is impressive, some analysts recommend patience, awaiting valuation adjustments before significantly increasing positions, given current valuations and competitive pressures from companies like Google, Nvidia, and Amazon.
