Microsoft Earnings: All Segments Are Good, With Azure Expected to Remain Strong Throughout 2024

Wide-moat Microsoft reported solid first-quarter results, including meaningful upside on both the top and bottom lines. We see modest improvement in the demand environment on the commercial side, with Azure strength, modest AI contributions, an easing of cloud optimization efforts by clients, and persistently solid execution. We’re also encouraged by Microsoft’s outlook, especially consistent Azure growth in excess of 25% throughout the year. Guidance includes Activision, which adds more than $6 billion in revenue to our estimates but pressures margins in the near term. These factors drive us to raise our fair value estimate to $370 from $360. We continue to see shares as modestly undervalued, dancing between 3 and 4 stars.