RBC Capital Positive on Microsoft (MSFT)
RBC Capital analyst Kash Rangan reiterated an Outperform rating and $500.00 price target on Microsoft (NASDAQ: MSFT)
The analyst comments "We went in-person to Microsoft Build, the annual flagship event for developers, where we listened to keynotes and breakout sessions, as well as gathered feedback from customers. We came away incrementally positive on Microsoft's commitment to maintaining AI leadership across multiple software categories. Taking Microsoft Fabric seriously. After keynotes, breakout sessions, and customer conversations, we believe Fabric can be a disruptive force in data analytics. Fabric is off to a good start with 11K+ customers in six months. During a breakout session, Microsoft displayed a QR code for a free trial of Fabric with $17,000 consumption credits and nearly everyone in the room pulled out their phones to scan the QR code. Given the importance of data (and data quality) in the age of GenAI, Microsoft is clearly making Fabric innovation a key priority. To this point, Microsoft publishes a 60-80 page monthly blog dedicated to Fabric's new capabilities. Customers we spoke to sounded enthusiastic about Fabric, especially further commitment to open data, open standards, and interoperability, including support for Snowflake's Iceberg (already supports Databricks' Delta), more out-of-the-box connectors like Adobe AEP (already supports Salesforce Data Cloud), and new data gateways (can pull-in data from AWS, GCP, or on-prem). Customers also were excited by the integrated Copilot experience (now GA) and updates to real-time intelligence capabilities. • Agent AI. In our view, one of the most notable threads was agent AI, which, to us, represents the next stage on the path to AGI. In early access inside Copilot Studio, developers can build custom copilots capable of operating as virtual employees, performing tasks autonomously (with guardrails, of course). Microsoft demoed its own agent AI app, Team Copilot, a team assistant to moderate meeting agendas and take notes, assign tasks and track deadlines, and collaborate in groups within Teams, Loop, and Planner (preview late-2024). • Focused on making AI open and cheaper. Azure AI now has 1,600+ models available off-the-shelf, including Microsoft's new full family of small language models called Phi and GPT4o, which is 12x cheaper to API call than GPT4 and 6x faster to respond to queries. The company also highlighted AI Search's storage capacity has increased 12x in vector index size for no additional cost to help scale RAG workloads. These are just a few examples of how Microsoft is pushing down the cost curve. • Commercial PC refresh cycle driven by AI PCs? Following a post-COVID hangover in PC sales, the market has returned to growth. We believe AI PCs (40+ TOPS Windows devices on Arm) coming available in June, in combination with end of support for Windows 10 in October 2025, can serve as catalysts to drive a PC refresh cycle in 2025-2026."
For an analyst ratings summary and ratings history on Microsoft click here. For more ratings news on Microsoft click here.
Shares of Microsoft closed at $430.52 yesterday.