Tech giant Microsoft (MSFT) is set to report accelerated growth in its Azure cloud business when it releases its Q2 fiscal 2025 earnings on January 29, according to Jefferies. The investment firm expects Azure’s growth to reach 32% year-over-year due to an increase in capacity and improving consumption trends. This growth would build on the 34% year-over-year growth that was reported in the previous quarter.
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Investors will also be watching for updates on the growth of Microsoft 365 (M365) Copilot, its key AI-powered product. Jefferies’ analysts, led by Brent Thill, report that their checks with CIOs indicate a bullish long-term outlook for M365 Copilot despite a gradual rollout due to data governance concerns. This optimism contrasts with the more conservative sentiment among investors.
As a result, Jefferies has reiterated its Buy rating on Microsoft stock, with a price target of $550. The firm notes that Microsoft’s AI business is growing rapidly, with the company on track to reach $10 billion in annual AI revenue by the end of the second quarter. While AI currently accounts for only about 4% of Microsoft’s total annual recurring revenue (ARR), Jefferies believes there may be opportunities for further growth in this area.
Is MSFT Stock a Buy?
Overall, Microsoft stock has a Strong Buy consensus rating among 29 Wall Street analysts. That rating is based on 27 Buys and two Holds assigned in the last three months. After an 11% rally in its share price over the past 12 months, the average MSFT price target of $509.42 implies 14.8% upside potential.
