Microsoft beats on accelerating Azure and AI growth, Goldman, Bernstein up targets

 

Microsoft beats Q4 estimates on accelerating Azure and AI growth as Goldman Sachs and Bernstein raise price targets

• Azure revenue grew 43% in Q4, ahead of guidance, with demand still exceeding capacity.
• Microsoft Cloud revenue rose 27% to $59.3B; full-year cloud surpassed $214B, up 27%.
• Q4 EPS was $4.74, up 23% adjusted, including $0.27 discrete upside from Anthropic and restructuring.
• Commercial remaining performance obligation jumped 84% to $678B, signaling durable multi‑year cloud and AI demand.
• Over 30M paid M365 Copilot seats, with net seat adds more than doubling sequentially.
• GitHub Copilot revenue accelerated over 60% QoQ after move to usage-based pricing.
• FY27 guidance calls for double-digit revenue and operating income growth, with margins down less than 1 point.
• Cloud gross margin fell YoY on AI infrastructure, but was better than expected due to efficiency gains.
• PC, Windows OEM/Devices and Xbox remain headwinds, with FY27 Windows OEM/Devices revenue guided down high teens.
• Management remains highly confident on AI ROI but flags ongoing component inflation and capacity constraints.
• Main concern: sustaining margins and supply discipline amid massive AI capex, component inflation, and capacity constraints.
• Strong quarter, driven by accelerating Azure and Copilot-led AI demand more than offsetting PC and margin headwinds.
• Bernstein lifted its Microsoft price target to $647 alongside the Q4 results.
• Goldman Sachs raised its Microsoft price target as Gabriela Borges cited accelerating AI revenue from Azure and Copilot.

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