Microsoft’s AI Pivot

1 Mins read

Analyst Alex Zukin of Wolfe Research highlights the shift in sentiment towards Microsoft Corp. (MSFT) within Wall Street. Previously praised as the poster child for artificial intelligence (AI) in Big Tech, Microsoft’s investment in ChatGPT creator OpenAI and promises to incorporate AI into its products had generated excitement. However, recent doubts have emerged regarding the functionality, profitability, and competitive advantage of Microsoft’s AI initiatives.

Despite this shift in narrative, Zukin remains optimistic about Microsoft’s upcoming report on October 24th. He notes the improvement in Microsoft’s fundamentals in the present moment as evidenced by incremental share gains. Although sentiment remains mixed, options imply a moderate stock movement of 4.5%, indicating a relatively stable outlook compared to previous quarters.

Furthermore, Microsoft’s position appears unique in a challenging economic climate. While the overall enterprise buying environment remains difficult, Microsoft shows signs of stabilization and the emergence of promising opportunities ahead of its peers.

Zukin predicts that Microsoft will achieve 26% growth in Azure revenue during the fiscal first quarter on a constant-currency basis. Additionally, he expects the company to provide a fiscal second-quarter outlook that aligns with the consensus view of 25% revenue growth.

Despite experiencing an 8% decline in the last three months, Microsoft’s shares have seen a remarkable 38% increase thus far this year.

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