On Tuesday, Mizuho Securities updated its outlook on Microsoft Corporation (NASDAQ:MSFT), increasing the price target to $480 from the previous $450, while maintaining an Outperform rating on the stock. The adjustment follows Microsoft's fiscal third-quarter earnings, where the tech giant reported total revenue of $61.9 billion, surpassing the $60.8 billion forecast by analysts.
The revision was influenced by Microsoft's Azure cloud service's performance, which saw a 31% year-over-year constant currency (CC) revenue growth, outperforming the expected ~28%. Notably, Azure's core consumption CC growth was reported at 24% year-over-year, consistent with the previous quarter and approximately three percentage points higher than anticipated. This growth was attributed to an uptick in cloud migration activities.
Additionally, artificial intelligence (AI) advancements have played a significant role in Azure's revenue increase, contributing around seven percentage points to its growth, compared to a roughly six-point contribution in the previous quarter. Despite the ongoing challenges in the global market, Mizuho highlighted that Microsoft's medium-term revenue growth prospects appear to be more significant than many may realize.
The firm's confidence in Microsoft is also bolstered by the company's tangible adoption and monetization of generative AI (GenAI) technology. Mizuho's updated price target of $480 is primarily derived from its Sum of the Parts (SoTP) model, and reflects a forward price-to-earnings (P/E) multiple of 40 times for calendar year 2024 estimates and 34 times for calendar year 2025 estimates.
In other recent news, Microsoft Corporation is in the spotlight with several key developments. BMO Capital Markets has raised the price target for Microsoft to $500 from $465, maintaining an Outperform rating, primarily due to the expected growth in the company's cloud business, particularly Azure. Meanwhile, GOP lawmakers have requested an intelligence briefing concerning Microsoft's $1.5 billion investment in UAE-based AI company G42, citing potential national security concerns.
Google (NASDAQ:GOOGL) Cloud is also reassessing its stance on Microsoft's cloud licensing practices following Microsoft's settlement of an antitrust complaint with the Cloud Infrastructure Services Providers in Europe. Microsoft has also withdrawn from its observer role on the OpenAI board amid intensifying antitrust focus, expressing confidence in OpenAI's improved governance and stating that its observer role is no longer necessary.
Finally, Microsoft has agreed to pay $14 million to settle allegations of unlawful penalization of employees taking leave in California. These are among the recent developments surrounding the technology giant.
InvestingPro Insights
Following Mizuho Securities' updated outlook on Microsoft Corporation (NASDAQ:MSFT), InvestingPro data provides additional context to the company's financial standing. Microsoft's market capitalization stands at a robust $3.37 trillion, reinforcing its position as a leading force in the technology sector. The company's P/E ratio is currently at 39.14, suggesting a premium valuation, which aligns with Mizuho's forward P/E multiple estimates for the coming years. Additionally, Microsoft has demonstrated strong revenue growth, with a 13.97% increase over the last twelve months as of Q3 2024, further supporting the positive outlook on the company's financial health and growth trajectory.
InvestingPro Tips highlight Microsoft's consistent dividend growth, having raised its dividend for 18 consecutive years, and its ability to maintain dividend payments for 22 consecutive years. These factors, combined with a low price volatility and a strong foothold in the software industry, may offer investors a sense of stability and reliability. For those seeking a deeper dive into Microsoft's financials and additional strategic insights, InvestingPro offers more tips on the company, which can be accessed with the promo code PRONEWS24 for up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.