Microsoft Stock at a Glance

  • Fair Value Estimate: $325
  • Star Rating: 3 stars
  • Uncertainty Rating: Medium
  • Economic Moat Rating: Wide

Microsoft Earnings Update


Wide-moat Microsoft MSFT reported a strong fiscal third quarter, including meaningful upside on both the top and bottom lines. We see signs of encouragement in important areas like Azure, which were slightly better than our model; and Microsoft 365, which was solid, based on better-than-expected renewals. The outlook for June was actually better than our above-consensus view, which is also a positive indicator. Macroeconomic pressures persist but are not worsening despite some new challenges, such as the simmering banking crisis. On balance, we think there is more for bulls to embrace here.

Thus, we raise our fair value estimate on Microsoft stock to $325 per share, from $310, and continue to view shares as attractive.

We see results as reinforcing our long-term thesis centering on the proliferation of hybrid cloud environments and Azure, as the firm continues to use its on-premises dominance to allow clients to move to the cloud at their own pace.

We continue to center our growth assumptions around Azure, Microsoft 365 E5 migration, and traction with the Power Platform for long-term value creation. We think investors also have a call option on artificial intelligence within shares of Microsoft. That said, we are not sure enterprise software vendors are out of the woods yet from a macro perspective.

For the March quarter, revenue grew 7% year over year as reported, or 10% in constant currency, to $52.86 billion, compared with the midpoint of guidance of $51.00 billion. Relative to the year-ago period (as reported), productivity and business processes grew 11%, intelligent cloud grew 16%, and more personal computing, or MPC, declined 9%. Compared with guidance, all three segments were ahead of the top end of the guidance ranges, with notable strength in MPC. On the latter, PC demand, Bing and advertising, and gaming were all better than expected, which contributed to about $1 billion of upside relative to our expectations. Good sales execution helped drive solid renewals.