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Microsoft Impresses Wall Street with Strong Azure Results and Guidance

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Microsoft’s first-quarter results exceeded expectations, driven in part by its Azure cloud unit, leading Wall Street analysts to hail the tech giant’s performance. Citi analyst Tyler Radke stated, β€œMicrosoft simply delivered in Q1, and we’d expect the stock to trade up modestly.” As a result, shares rose nearly 4% in pre-market trading on Wednesday.

Radke also noted that the guidance provided by Microsoft during the earnings call showcased strong growth and indicated that demand trends are stabilizing or even accelerating. He has a buy rating and a $430 price target on Microsoft’s stock.

For the quarter ending September 30, Microsoft reported earnings of $2.99 per share on $56.52 billion in revenue. The intelligent cloud unit contributed $24.26 billion, while the productivity unit accounted for $18.59 billion. Cloud services revenue, predominantly from Azure, grew by 29% (or 28% YoY in constant currency), and the More Personal Computing segment generated $13.67 billion in revenue.

Looking ahead, Microsoft expects second-quarter revenue to fall within the range of $60.4 billion to $60.8 billion. CFO Amy Hood highlighted that Azure revenue growth is expected to remain stable compared to Q2 results.

Analyst Dan Ives from Wedbush Securities commended Microsoft’s strong cloud demand trends and noted the company’s ability to gain market share from competitors like Google and Amazon. Ives also emphasized Microsoft’s potential in the artificial intelligence (AI) space, as the company prepares to unveil Copilot for the enterprise. He believes customers are recognizing the value of AI through extended use cases, which bodes well for Microsoft’s future growth.

Rishi Jaluria, an analyst from RBC Capital Markets, highlighted not only the impressive Azure and generative AI opportunities but also the fact that operating margins are expected to remain flat despite concerns about dilution from expenses related to the Activision acquisition.

During the earnings call, CEO Satya Nadella revealed that Microsoft now boasts 13 gaming franchises worth $1 billion or more, thanks to the recent deal with Activision. The company’s strong performance and expansion into various markets demonstrate its potential to grab a significant portion of the cloud and AI industries over the next few years.

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