Microsoft stock has been crowned one of the winners in the artificial intelligence megatrend. But the software giant will need to prove its bona fides with its fiscal fourth-quarter report next week.
The focus of Microsoft's Q4 report next Wednesday will be on its Azure cloud computing infrastructure business, which provides capacity for running AI applications.
Last quarter, Microsoft reported Azure revenue growth of 35% year over year in constant currency, topping analyst estimates for 31% growth. For fiscal Q4, Microsoft predicted Azure growth of 34% to 35% in constant currency.
Further, the company noted that it's been supply constrained for cloud AI services.
"In our view, the investor bogey is for constant currency Azure growth of 36% for Q4 and guidance for a modest deceleration to 34% growth in Q1," UBS analyst Karl Keirstead said in a client note Tuesday.
Keirstead reiterated his buy rating on Microsoft stock and raised his price target to 600 from 500.
On the stock market today, Microsoft stock rose a fraction to close at 505.87. It notched a record high of 514.64 on Friday.
On June 5, Microsoft stock broke out of a 47-week consolidation pattern at a buy point of 468.35, according to IBD MarketSurge charts. It is now extended beyond the 5% chase zone, based on IBD trading principles.
"Following strong Q3 results, investor sentiment has improved, pushing shares near all-time highs," Morgan Stanley analyst Keith Weiss said in a client note Tuesday. "However, risk/reward remains attractive."
Microsoft Stock Is On Two IBD Lists
Weiss noted Microsoft's reasonable earnings multiple and durable revenue growth, driven by generative AI.
He rates Microsoft stock as overweight with a price target of 530.
Sales channel checks point to mid-30s percentage growth in Azure revenue on a constant currency basis in fiscal Q4 and continuing into the first half of fiscal 2026, Weiss said.
Microsoft's AI Copilots for its software applications remain another area of potential growth, he said. The company still must prove the return on investment for customers using Copilot services, Weiss said.
Other focus areas for the earnings report include Microsoft's capital expenditure plans and its evolving relationship with AI partner OpenAI, analysts say.
Microsoft stock is on two IBD lists: Long-Term Leaders and Tech Leaders.
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