Stifel Raises Microsoft Price Target to $650

Stifel analyst Brad Reback raised the price target on Microsoft (NASDAQ: MSFT) to $650 (from $575) while maintaining a Buy rating.

“Consistent with recent thoughts, Microsoft posted a strong 1Q.

Azure growth was ~300bps above expectations (modestly above buyside targets), M365 Commercial Cloud beat by ~100bps, and Microsoft Cloud GM increased ~100bps Q/Q.

Azure outperformance was driven by improved CPU monetization, GPU fleet efficiency gains and higher revenue/token (new frontier models) that offset some 3P capacity slippage.

Looking forward, management guided 2Q Azure to accelerate to 49-50% Y/Y-CC, stemming from broad-based customer demand, sustained operational efficiency gains and ramping new DC capacity.

On M365 Commercial Cloud, product improvements are generating strong GitHub Copilot adoption/usage and ARPU growth from M365 Copilot, E5, and E7, and management indicated these trends should help accelerate growth over the course of FY27 with 2Q at ~19% Y/Y-CC.

Net/net, these results increase our confidence in the company’s ability to sustain mid/upper-teens revenue growth and that strong COGS/OPEX operational efficiencies should be supportive of expanding operating margins.

Read Thru: We believe the better than expected Azure result bodes well for our infrastructure consumption names, including DDOG (Buy, $278.41) and FROG (Buy, $100.47) that report next week, as well as off-quarter names like SNOW (Buy, $339.91) and MDB (Buy, $393.44).”

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