Kyle Reidhead
CEO & Analyst of Milk Road/Milk Road AI
Microsoft's comeback looks set to continue as checks point to accelerating productivity and cloud demand. Citi cites CIO surveys and reseller checks; TD Cowen reports the strongest Azure readings in its third-party data and surveys naming Microsoft the top intended destination for new AI budgets. TD Cowen says this could bring a higher-than-normal earnings beat; Mizuho calls its cloud and AI adoption checks very healthy. x.comÂ
Microsoft's AI spending is producing faster growth with better economics: Azure accelerated to 48% on a $100B+ base while capex was $39.4B, below expectations. Management then guided Azure to 49-50% and said demand still exceeds supply, ending the debate over whether AI investment is paying off. Overweight, $625 target. x.com x.com x.comÂ
Microsoft's hold on enterprise software and the cloud running AI makes it one of tech's best positions to own. Fiscal Q1 revenue rose 19% on Azure and the AI stack, while operating income rose 21% and net income 32%. Grade: A. x.comÂ
Microsoft's delivery delays are affecting earnings, making other sources of returns look safer now. x.comÂ
Microsoft's faster Azure growth on less capital spending than feared is the mix investors wanted from Big Tech. Azure brought in $33.2 billion last quarter, up 48%, its third consecutive quarter of accelerating growth; capex was $45.2 billion versus $50.8 billion expected. x.comÂ
Azure's accelerating growth and better returns per capex dollar leave further upside on the table for Microsoft, the favored hyperscaler. Azure grew 48% versus 44-45% guidance, its fifth straight beat. The stock is holding eight-week EMA support, with the blue candle still intact. x.comÂ
Microsoft is a great business but still an expensive bet at $385, because heavy AI capex is eroding free cash flow. Capex was revised to $190B for the year, $43B above expectations, and free cash flow fell to $15.8B. Revenue grew 18% to $82.9B, operating income 20%, Azure 40% and AI run rate reached $37B, with a 47% operating margin. The average analyst target of $560 implies 45% upside only if the AI spending converts on schedule. x.comÂ
Microsoft's salesforce and governed platform unlock AI spending at conservative firms. Faster enterprise than consumer AI adoption makes it effectively the only pure play. M365 Commercial may top 20% growth next quarter, sooner than expected on tonight's guide; GitHub resegmentation helps, but it should do so this year anyway. Azure and M365, two-thirds of revenue, should grow above 50% and 20% and may accelerate. $24-25 CY27 EPS remains achievable, implying under 22x forward earnings. x.com … Show more
Microsoft's 50% Azure growth and prospect of positive cash flow in 2027 make the stock look bulletproof. Headcount cuts, lower Anthropic spend, a better Copilot routed to cheaper tokens, and coming proprietary chips and model usage add to the case. It should get Apple's multiple plus recognition for cybersecurity. x.com x.comÂ
Microsoft is getting outworked as an infrastructure company. Its 40% Azure growth came entirely from OpenAI, which now runs on other clouds, while Anthropic runs on Google and Amazon. Amazon has Trainium, which Anthropic uses heavily, and Google has TPUs; Microsoft has no equivalent. Agentic software making Office less useful is a smaller part of the bear case. x.comÂ
Accelerating Azure and AWS growth shows hyperscaler buildout and monetization have not slowed. Microsoft reported 48% Azure growth and guided to 49-50%; Amazon expects AWS growth above 40% in 2027 and 2028, positive for the infrastructure trade. Amazon's growth is more capital intensive, with deeply negative free cash flow projected, though AWS margins remain healthy. x.com x.com x.comÂ
