Morgan Stanley said Microsoft (MSFT, Financials), the software and cloud computing business, has an appealing risk-reward profile ahead of its fiscal fourth-quarter results.
The bank's $600 price target implies upside of around 54% from current levels. Analysts estimate Azure revenue to rise approximately 41% at constant currency, helped by better channel inspections, improved graphics processing capacity and positive technology spending surveys.
Wall Street estimate is for Azure growth of around 40.5%. Morgan Stanley said even a minor beat might benefit investor sentiment as capacity limitations remain.
The use of Copilot will likewise be closely tracked. Paid seats for Microsoft 365 Copilot grew to 20 million in the fiscal third quarter, up from 15 million in the prior period.
Morgan Stanley said copilot revenue might be boosted by seat expansion, consumer migration to higher-priced plans and higher consumption-based AI usage.
The company also noted Microsoft's July 1 price hike for Microsoft 365 as a possible revenue tailwind for the next three fiscal years.
Risks: Microsoft is investing in building AI infrastructure, driving higher capital expenditure. Management expects capacity to remain tight and capex in calendar 2026 to be roughly $190 billion.
Now, investors will be looking for Azure growth, Copilot adoption and fiscal 2027 guidance in Microsoft's July 29 earnings report.