Tech giant Microsoft (MSFT) recently reported results for the second quarter of Fiscal 2025, with revenue and earnings surpassing the Street’s estimates. However, the slowdown in Azure revenue growth and Q3 FY25 revenue guidance miss renewed concerns about Microsoft’s massive AI (artificial intelligence) investments not generating the desired returns. Despite the ongoing challenges, several Wall Street analysts retained their Buy ratings on MSFT stock, reflecting their confidence in the long-term growth story.
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Analysts Remain Bullish on MSFT’s Long-Term Prospects
Following the Q2 print, Mizuho analyst Gregg Moskowitz reiterated a Buy rating on MSFT stock but lowered the price target to $500 from $510. Moskowitz noted that while Microsoft reported “decent” Q2 FY25 results, Azure’s revenue growth of 31% came in at the low end of the company’s guidance range due to subpar non-AI go-to-market (GTM) execution.
Moskowitz added that the Q3 FY25 revenue guidance was below the consensus estimate due to forex headwinds. Nonetheless, Moskowitz remains confident about Microsoft and thinks that the company’s revenue growth opportunities over the medium-term and beyond are greater than many realize.
Likewise, Wolfe Research analyst Alex Zukin lowered the price target for MSFT stock to $475 from $515, while reaffirming a Buy rating. The analyst highlighted that hopes of acceleration in Azure growth in H2 FY25 were crushed. Also, robust AI bookings continue to be impacted by capacity constraints, limiting any possible upside in AI Azure revenues in the second half. Moreover, Zukin said that the weak Q3 guidance indicates GTM pressures and the lack of full capacity to meet robust AI demand.
However, Zukin remains bullish on Microsoft, pointing out strong AI demand and monetization beyond Azure AI, with the company’s total AI business surpassing a $13 billion run rate and Microsoft 365 Copilot beating internal estimates. He also noted MSFT’s resilient operating leverage and the company’s expectation of operating margin expansion in FY25 despite persistent gross margin headwinds. Overall, despite near-term pressures, Zukin continues to believe that long-term AI benefits will fuel accelerating growth for MSFT and reacceleration in the company’s EPS growth in FY26 and FY27.
Is Microsoft Stock a Buy, Sell, or Hold?
Despite ongoing challenges, including concerns over return on AI investments and the DeepSeek jitters, most analysts remain bullish on Microsoft stock. With 28 Buys and three Holds, Wall Street has a Strong Buy consensus rating on MSFT stock. The average MSFT stock price target of $508.68 implies 23% upside potential from current levels. Shares have been almost flat over the past year.
