Microsoft Stock Outlook

Investing.com — Wedbush analysts expressed increased optimism regarding Microsoft's (NASDAQ:MSFT) stock following the tech giant's recent earnings report.

The company reported first-quarter results exceeding market expectations, with Azure's year-over-year constant currency growth at 34%, beating forecasts by 100 basis points.

AI-driven growth significantly contributed, resulting in a 12% boost compared to the previous quarter’s 8%, underscoring strong monetization trends in Microsoft's core cloud business.

However, shares dropped over 3% in premarket trading Thursday, as guidance for Azure's constant currency growth for the December quarter was set at 31%-32%, which fell short of some investors' more bullish expectations.

Wedbush's analysts, led by Dan Ives, disagreed with the initial market reaction, suggesting that the new Azure reporting standards caused some fluctuations and that a slight deceleration was anticipated by many investors due to supply constraints, predicting a reacceleration in the second half of 2025. They remain strong buyers of MSFT on any dips.

The investment firm reaffirmed an Outperform rating on Microsoft stock with a price target of $550.

Wedbush pointed out that December’s headline metrics were robust, especially in the Intelligent Cloud segment. Any observed weakness was attributed to PC demand, which Ives views as “background noise” amid the broader cloud and AI growth narrative.

The analysts concluded with increased bullish sentiment, seeing AI growth and Copilot monetization as pivotal for Microsoft, regarded as a tech stalwart in a significant growth phase.

Brett Iversen, Microsoft's VP of Investor Relations, confirmed AI capacity limitations will not be addressed until the second half of the fiscal year, which could also influence the negative premarket price movement.