Microsoft Faces Concerns on AI, Cloud Competition Ahead of Fiscal Q2 Earnings, Morgan Stanley Says

MT Newswires Live01-23 23:57

Microsoft (MSFT) faces "negative" investor sentiment due to concerns surrounding competition in artificial intelligence and cloud, despite robust Azure demand, Morgan Stanley analysts said in a Friday note.

The company is scheduled to report its fiscal Q2 financial results on Jan. 28.

Analysts said that Azure growth guidance, commentary on OpenAI, Copilot, and capital expenditure will all be key to determining the direction of Microsoft shares.

Morgan Stanley said that Azure's growth of about 40% in fiscal Q2 and 38% to 39% in fiscal Q3 on a constant currency basis could support a mid-teens total revenue growth for Microsoft in fiscal 2026.

The firm said that there is potential for low-to-mid single-digit operating expenditure growth in Q2 and fiscal 2026 to offset gross margin compression, helping deliver mid-teens operating income growth in the fiscal year.

Analysts estimate Microsoft's fiscal Q2 non-GAAP earnings of $3.97. Analysts polled by FactSet expect $3.91.

Morgan Stanley has an overweight rating on the stock and a $650 price target.

Price: 464.64, Change: +13.78, Percent Change: +3.06

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