Microsoft (MSFT, Financial) reported better-than-expected results for its first fiscal quarter ending in September, driven by the continued influence of AI on cloud and productivity-related businesses. Commercial bookings rose by 30%, surpassing expectations and ensuring future growth, primarily due to an increase in contracts worth over $10 million for Azure and Microsoft 365.
The focus on Azure has led to revenue guidance for the fiscal quarter ending in December being projected to grow between 31% and 32% year-over-year, which fell short of market expectations. This has caused a decline in Microsoft's stock price following the earnings announcement. However, the company remains optimistic about demand, attributing the slower Azure growth to capacity constraints, which are expected to ease in the second half of the fiscal year ending June 2025.
The report maintains a positive outlook on Microsoft's synergy in the AI technology revolution, keeping its revenue estimates unchanged for fiscal years 2025 and 2026. Additionally, it revised the net profit forecast for 2026 upward by 2.9% to $121.9 billion, considering anticipated reductions in development costs, and maintained an "outperform" rating with a price target of $490.
