Microsoft Earnings: Strap In. Azure Growth Is Set to Accelerate in the Second Half of Fiscal 2025

We raise our fair value estimate for wide-moat Microsoft to $490 per share, from $435 after the company delivered another good quarter overall, even if it was in line with our expectations on headline numbers. In an earnings call packed with new data points around artificial intelligence-related demand, which were impressive, in our view, the single most important item was guidance that calls for Azure revenue to accelerate in the second half of the year as the current surging investment in data center capacity comes online. Therefore, we raised our revenue growth estimates for the medium term, and we also tweaked our profitability assumptions higher based on consistently good performance and a solid outlook. Revenue was again governed by data center capacity constraints and several pockets of slight weakness arising in Europe. With shares down slightly afterhours following a recent pullback, we see the stock as attractive.