A Microsoft Corporation (NASDAQ:MSFT) analyst highlights the key items to watch for in the company's second-quarter financial results on Wednesday after market close, as skeptics could be growing.
Microsoft Analyst Maintains Outperform Rating
Wedbush analyst Dan Ives maintained an Outperform rating on Microsoft with a price target of $625.
AI Growth Still In Early Innings for Microsoft
Ives said Microsoft should report another strong quarter on Wednesday, with growth from Azure leading the way.
"We expect to see another quarter of robust results with MSFT still in the lead in the AI Revolution," Ives said.
The analyst said Microsoft could see more AI-related growth as companies line up for deployments across enterprises from the tech giant.
"The Street continues to way underestimate the Azure growth story in our view with an AI driven shift about to happen in Redmond heading into 2026."
Ives said Microsoft is one of Wedbush's favorite large-cap technology stocks to own for the coming years.
The analyst said shares have underperformed due to increased competition in the hyperscaler sector and concerns about the company's relationship with OpenAI.
Street estimates of $80.28 billion for the quarter and Azure growth of 37% year-over-year are beatable, Ives said in the new note.
The analyst said Microsoft is expected to keep spending to boost its AI buildout, which will be a key area to watch on Wednesday.
"We view MSFT as the clear front-runner on the enterprise hyper-scale AI front despite increasing competition from Amazon/AWS and Google/GCP."
Ives said AI is the key to Azure growth and that it is just getting started.
"We believe the stock still has yet to price in what we view as the next wave of cloud and AI growth coming to the Microsoft story in 2025 with a strong competitive edge in its massive installed base."
Ives said Microsoft is set for a "massive 2026," making shares a "compelling buy" at current levels.
"Microsoft is set to be a major beneficiary of this 4th Industrial Revolution."
MSFT Price Action: Microsoft stock was up 0.9% to $470.28 on Monday versus a 52-week trading range of $344.79 to $555.45. Microsoft shares are up 8.2% over the last 52 weeks.
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