Microsoft: Oppenheimer analysts see continued durable growth ahead

Investing.com -- Oppenheimer assumed coverage of Microsoft (NASDAQ: MSFT) with a Perform rating in a note to clients Thursday, citing strong third-quarter results and a favorable outlook for Azure and AI services.

The firm believes Microsoft remains well-positioned to weather macroeconomic pressures and benefit from ongoing enterprise IT and AI adoption.

“We see durable growth for Microsoft from its dominant positioning in enterprise IT stacks and across productivity categories,” Oppenheimer analysts wrote.

Despite broader concerns around IT spending, the firm noted that such risks “may be overblown for Microsoft given the impressive Azure business beats and strong F3Q results.”

Microsoft reported third-quarter revenue of $70.07 billion, up 13% year over year and 15% in constant currency, beating consensus by $1.64 billion.

Azure and other cloud services grew 33% year over year, or 35% in constant currency, outpacing guidance and buoyed by increasing AI-related demand.

“F3Q Azure growth and guidance were 400bps faster than most buyside expectations,” Oppenheimer noted.

The firm’s outlook for Microsoft’s fiscal fourth quarter remains optimistic. It projects Azure growth of 34% to 35% in constant currency and Intelligent Cloud revenue between $28.75 billion and $29.05 billion, both above consensus expectations.

Productivity and Business Processes revenue is expected to reach $32.05–32.35 billion, also ahead of estimates.

Among key positives, Oppenheimer highlighted Azure’s AI-driven momentum, noting that “F3Q Azure revenue attributable to AI services increased 300bps q/q to 16 points.” Operating margins also impressed, with Microsoft delivering a 45.7% operating margin, 108 basis points higher year over year.

While the firm acknowledged some weaknesses—including higher-than-expected capex and softer growth in 365 Consumer seats—it emphasized Microsoft’s potential to “gain share in the hyperscaler market and be a winner in the generative AI cycle.”

Overall, Oppenheimer views Microsoft as a “safer harbor than other software names during the macro turbulence.”

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