Microsoft Upgraded as Analyst Sees Steady Revenue Growth

Microsoft Corp (NASDAQ:MSFT) received an upgrade from Stifel analyst Brad Reback, who believes the company's revenue growth can reach mid-to-upper teens. The upgrade is based on Microsoft's strong performance in cloud infrastructure, generative AI deployment, and enterprise software expansion.

The analysts expect Azure to continue growing despite capacity concerns. Improved stack efficiencies reduced hardware deployment times by more than 50%, enabling faster monetization of Azure revenue. Additionally, OpenAI usage and revenue share are expected to contribute to Azure's growth.

Microsoft's M365 Copilot reached around 30 million seats in the fourth quarter, growing 10 million sequentially. This is attributed to product improvements that gave customers confidence to move proof-of-concept work into full-scale deployments. The analyst noted that Microsoft's ability to sustain healthy M365 ARPU (average revenue per user) gains in coming years is supported by progress in M365 Copilot and a growing portfolio of M365 products.

Reback also expects Microsoft's operating margins to remain stable, supported by optimized spending, disciplined capital allocation, and reduced internal LLM R&D costs. He noted that open-weight models are increasingly delivering outcomes at a fraction of the cost of frontier models, reducing Microsoft's need to invest heavily in its own LLM offering.