Microsoft Earnings: Solid Quarter as AI Growth Shines; Currency Hurts Otherwise Reasonable Guidance

We are maintaining our fair value estimate for wide-moat Microsoft at $490 per share after the firm reported good results with guidance that was somewhere between our expectations and slightly light. The outlook generally offsets quarterly performance, which holds our fair value steady. Results look solid across the board, with good artificial intelligence demand and monetization. With shares down after-hours we continue to view the stock as attractive, and we think accelerating Azure revenue in the fourth quarter will help drive propel it higher over the next year. We see results reinforcing our long-term thesis, which centers on the expansion of hybrid cloud environments, the proliferation of artificial intelligence, and Azure. The firm continues to use its on-premises dominance to allow clients to move to the cloud at their own pace. We center our growth assumptions around Azure, Microsoft 365 E5 migration, and traction with the Power Platform for long-term value creation.