Investing.com -- Bernstein is pushing back on bearish sentiment around Microsoft, arguing that investor concerns about the technology giant's heavy capital expenditure failing to translate into revenue are misplaced and may in fact represent a buying opportunity.

Analyst Mark Moerdler, who has an outperform rating and $641 price target on the stock, said the most likely explanation for the apparent disconnect between capital spending and revenue growth is timing rather than any fundamental problem with the business.

"One of the largest drivers, we believe, is that there is a timing delay between the CAPEX investment and the capacity being available to drive revenue growth and investors are not taking that into account," Moerdler wrote.

Bernstein analyzed five ways Microsoft could be allocating its capital expenditure, including first-party apps, free Copilot usage, internal use and model training, lower-margin Azure revenue and capacity not yet online, and concluded that the investment mix is largely constructive.

According to Moerdler, Copilot spending is generating good-margin software-as-a-service revenue, research and development as a percentage of revenue remains relatively stable, and Azure margin pressure reflects a temporary mix shift toward lower-margin AI workloads that should resolve as AI margins improve.

On the outlook, Moerdler stated that Azure revenue growth should accelerate in the third quarter and could be equally strong or stronger in the fourth.

"We do not believe that there is anything fundamentally wrong," he wrote. “We believe MSFT is doing the right things for value creation and Azure growth will in fact inflect up in Q3/Q4 which should allay much of the fears. This is one of our favorite names given AI concerns are overblown; the easy valuation and the quality of the business.”