Azure acceleration is in sight, Microsoft's AI layout continues to advance, and Wall Street recommends buying on dips

According to Zhitong Finance APP, Microsoft (MSFT.US) achieved a year-on-year revenue growth of over 18% for the second consecutive quarter. Analysts pointed out that the company's continuous expansion of artificial intelligence computing power is becoming a signal for accelerating growth in Azure. After the tech giant announced its Q1 fiscal year 2026 financial report, almost all major financial institutions reiterated their "overweight" or "buy" ratings, viewing any pullback as a buying opportunity.

Morgan Stanley reiterated its "overweight" rating on Microsoft and raised its target price from $625 to $650. Morgan Stanley analyst Keith Weiss's team wrote in a Thursday investor report: "Commercial bookings grew 111% year-on-year, and RPO grew 51%, highlighting strong demand; Azure's constant currency growth rate was 39%, above the company's guidance of 37%, but slightly below the buyers' expectation of 40%. However, in a supply-constrained environment, getting hung up on Azure's growth rate being just 1 percentage point lower seems to miss the point—growth is accelerating. We will actively buy on dips."

Microsoft's Chief Financial Officer Amy Hood stated during the earnings call: "Azure AI service revenue broadly met expectations, and even as we continue to bring more capacity online this quarter, demand across workloads still exceeds supply."

JP Morgan also reiterated its "overweight" rating and slightly raised its target price from $565 to $575. JP Morgan analysts led by Mark Murphy stated in a Thursday report: "Our sense is that some investors may be overly optimistic, originally expecting Azure's extremely high growth rate to continue, and may anticipate Q1 Azure constant currency growth to reach 40-41%, and/or believe that the low year-on-year base in FQ2 could pave the way for stronger Azure guidance."

"Even if there are some short-term fluctuations that may slightly disappoint some investors, the long-term outlook still seems intact; we appreciate Microsoft's emphasis on resource substitutability, disciplined execution, and thoughtful business decisions, which we believe are reflected in its operating profit growth of 23% year-on-year," he added.

Additionally, Microsoft's renewal of its partnership agreement with OpenAI also helps quell speculation about the relationship between the two parties. In this regard, Bank of America analyst Brad Sills stated in a report: "The previously announced renewal of the OpenAI partnership essentially resolves this controversy, with the agreement including a $250 billion commitment to Azure and continued exclusive collaboration on AI, reaffirming Microsoft's core position in AI building and commercialization."

Bank of America reiterated its "preferred stock" buy rating and a target price of $640. Sills stated: "Our conclusion is that even with supply chain constraints, Azure's growth remains robust in the high 30% range. With the new OpenAI agreement expected to take effect as early as Q2 of fiscal year 2026 and supply chain constraints easing in fiscal year 2027, we see a path for Azure's growth to accelerate again."

Meanwhile, Wedbush has also joined the bullish camp, believing that Microsoft will be the next company to join Nvidia's $5 trillion market value club. Wedbush reiterated its "outperform" rating and a target price of $625 The Wedbush analyst Daniel Ives' team stated in an investor report: "Nadella's team has once again delivered a solid quarter, positioning the company to potentially join the $5 trillion club within the next 18 months. The AI revolution is still in its early stages, and Microsoft is entering the next phase of AI commercialization. We believe any knee-jerk decline represents a strong buying opportunity."

As of the time of publication, Microsoft was up 0.49% in pre-market trading on Friday