Morgan Stanley's recent report highlights continued strong demand for Microsoft (MSFT, Financial), with order growth reaching 23% and remaining performance obligations growing 17% annually. However, supply constraints are currently limiting the growth of generative AI-related businesses. Despite these challenges, the management is optimistic about increasing capacity in the latter half of the year.
The report also notes some concerns, including lower-than-expected guidance for Azure's second quarter, as well as revenue and earnings per share forecasts that fall short of predictions. There are increased losses in other income, and some capacity expansions have been deferred to the second half. Morgan Stanley has raised its price target for Microsoft from $506 to $548 and maintains an "overweight" rating.
