Microsoft Earnings: All-Around Strength, Including Azure, Demonstrates Resiliency

Microsoft reported a strong fiscal third quarter, including meaningful upside on both the top and bottom lines. We see signs of encouragement in important areas like Azure, which were slightly better than our model; and Microsoft 365, which was solid, based on better-than-expected renewals. The outlook for June was actually better than our above-consensus view, which is also a positive indicator. Macroeconomic pressures persist but are not worsening despite some new challenges, such as the simmering banking crisis. On balance, we think there is more for bulls to embrace here. Thus, we raise our fair value estimate for wide-moat Microsoft to $325 per share, from $310, and continue to view shares as attractive.