Stifel Upgrades Microsoft to Buy, Cites Sustained Azure Upside

Stifel, a financial services company, has upgraded Microsoft's stock to 'Buy' from 'Hold', citing increased confidence in the tech giant's ability to sustain mid-to-upper-teens revenue growth.

The analysts led by Brad Reback pointed out that Microsoft 'clearly turned the corner post the June quarter print,' driven by sustained Azure upside, reduced large-language-model research intensity, and accelerating contribution from OpenAI.

Azure saw acceleration in the June quarter due to efficiency-driven capacity gains and a step-up in OpenAI's contribution. Stifel expects 200 to 300 basis points of further Azure upside as Microsoft achieves 'a more sustained efficiency cadence across the stack from silicon, models and software.'

The analysts also noted that CFO Amy Hood has cut 'dock-to-live times' by more than 50% over the past year, helping capacity convert to revenue faster.