UBS has maintained its Buy rating on Microsoft (NASDAQ:MSFT) and kept a $600.00 price target following the software giant's recent quarterly results. That target implies substantial upside from Microsoft's last reported share price of $422.83, and sits within a broader analyst target range of $450 to $730 based on InvestingPro data.
In its assessment, UBS analyst Karl Keirstead highlighted the company’s financial performance, noting 15% total constant currency revenue growth and 21% growth in non-GAAP earnings per share. UBS also observed that Microsoft has delivered 16.67% revenue growth over the trailing twelve months, underscoring its continued scale in enterprise software and cloud services.
Market reaction after hours was modestly negative, a move UBS attributed in part to segment-level growth that came up slightly short of some expectations. Azure and Other Cloud Services expanded 38% in constant currency, while Microsoft 365 applications grew 14%. UBS had been modeling 39% growth for Azure and 15% for Microsoft 365, leaving each segment a percentage point or so behind those internal estimates.
UBS flagged one operational factor that may have influenced those outcomes: Microsoft reallocated constrained GPU capacity away from Azure and toward first-party products. That capacity shift was cited as a possible contributor to the marginal underperformance versus UBS's segment forecasts.
Despite the shortfalls, UBS pointed to what it called a "compelling" capacity outlook and potential conversion of backlog as reasons to sustain a positive stance on the shares. Those dynamics, in the bank's view, support the existing Buy recommendation even with the near-term variance in cloud growth rates.
The company’s earnings release also included broader top-line context. Reported revenue rose by more than $75 billion year-over-year to roughly $350 billion, driven in part by the continued expansion of its cloud businesses. The 38% constant currency growth in Azure and Other Cloud Services slightly exceeded Microsoft’s own guidance of 37%, though it did not meet some buy-side expectations.
Responses from other brokerages reflected a range of adjustments to price targets and interpretations of the results. TD Cowen cut its price target to $610, citing Azure growth below buy-side expectations. Deutsche Bank trimmed its target to $575, calling the results solid but not at the level of more ambitious market hopes. JPMorgan moved its target to $550 while maintaining an Overweight rating and continuing to evaluate Microsoft’s positioning in cloud and enterprise software.
Scotiabank adjusted its target down to $600, specifically noting concerns centered on Azure’s pace of growth. By contrast, Cantor Fitzgerald reaffirmed an Overweight stance, highlighting strong growth and usage for Copilot across Microsoft's ecosystem as a positive indicator.
Taken together, the post-earnings reactions illustrate a market weighing solid top-line progress and operational nuances - including capacity allocation and backlog conversion - against slightly softer-than-expected segment growth rates. UBS’s Buy rating rests on the firm view that capacity and backlog dynamics will support stronger outcomes going forward, even as other analysts revisit their valuations and assumptions.
Note: This article focuses on broker commentary and the company’s reported results; it does not introduce additional data beyond that reported by Microsoft and cited by the brokerages referenced.