Microsoft (MSFT.US) AI Engine Full Blast! Q4 Perfect Report Ignites Stock Price, Wall Street Cheers Growth Curve Undervalued

Zhi Tong Financial APP learned that on Thursday, Microsoft (MSFT.US) published its super-preferred fourth-quarter financial report and performance guidance, which not only gained market recognition but also received unanimous praise from Wall Street analysts.

After the financial report was released, this tech giant's stock price surged nearly 7% during trading hours, eventually closing up around 4%. As of Thursday's close, the company's stock price has risen over 27% year-to-date.

Wedbush raised Microsoft's target stock price from $600 to $625 and maintained a "run ahead" rating, reflecting its "impressive cloud services and artificial intelligence (AI) business growth momentum."

A team of analysts led by Daniel Ives pointed out: "This quarter's performance has left Microsoft multiple investors thrilled, with Azure cloud services' growth momentum clearly accelerating, AI revolution still strong, and more and more enterprises are actively investing in this strategic field. All indicators are far exceeding market expectations." Analysts predict that by 2026, the AI business will generate approximately $25 billion in incremental revenue.

"Microsoft's performance this quarter is truly perfect," Ives and his team said, "Cloud services and AI technology are driving profound changes across industries, and the company continues to occupy a key position in the AI revolution. However, we believe Microsoft's AI monetization process has just begun, as more enterprises accelerate their expansion of collaboration with Microsoft's AI, the growth potential for 2026 remains underestimated." They emphasized that Azure revenue grew 39% year-over-year (far exceeding market expectations of 34% and baseline value of 36%), exceeding $75 billion (34% year-over-year growth), making it a key indicator of AI contribution. All workloads achieved full growth, verifying the AI technology's transformation of Microsoft's cloud business development trajectory.

Looking ahead, although expected to face computational limitations in the first half of 2026, Microsoft has given a stable annual guidance opening target. Analysts emphasize that it is clear that 2026 will be a turning point for Microsoft's AI business growth.

Analysts predict that the "Smart Cloud" department's revenue will reach $301-304 billion in 2026 (Wall Street expects $294.2 billion); with fixed exchange rates, Azure growth rate is expected to be around 37% (Wall Street expects 34%).

Ives' team revealed that Microsoft is pushing forward a strategy for the fusion development of cloud services and AI. The company plans to invest over $30 billion in capital expenditures in the first quarter of 2026, with an estimated full-year investment of $12 billion. This strategic layout aims to expand cloud infrastructure and enhance data center capacity to seize the strong market demand.

Goldman Sachs reiterated Microsoft's "buy" rating and raised its target price from $550 to $630.

A team led by Kash Rangan pointed out: "We are increasingly confident that AI-driven growth will continue to help Microsoft expand its market share in various business areas. This quarter's performance has confirmed our views - AI technology is permeating the entire product stack, and Microsoft's leading position in GPU computing is producing a ripple effect, driving demand for high-margin products." They emphasized that these products cover all levels of the technical stack.

Analysts believe that in the era dominated by smart bodies, as AI workloads rapidly expand, Microsoft will fully benefit from storage, database, and application usage growth (including revenue sharing with OpenAI).

Rangan's team stressed: "Referencing the previous cloud computing cycle development trajectory, as high-margin AI reasoning workload scales up and Microsoft continues to drive customers to use its high-margin platforms and applications through cross-selling, the company's profit rate and profit growth will regain momentum." They emphasized that the data shows Azure business growth rates have accelerated by 8 percentage points in the second half of the year: from January's 31% to March's 35%, with a full-year target of 39%. The strong performance over the past two quarters has temporarily dispelled concerns about the company's ability to maintain profitability.

Ader team pointed out that Azure revenue growth rates have accelerated by approximately $5 billion and $7 billion in the previous two quarters, equivalent to the market value of Monday.com (MNDY.US). "Such super-preferred performance makes us believe that the market will not continue to question Azure's support costs this year," they said.

Ader team also emphasized that the financial report conference call did not mention major macro headwinds and that "since we were worried about cutting operating expenses to maintain profit rates, Microsoft has already laid off over 10,000 people." They noted: "We previously indicated that in order to maintain a 'hold' rating, it would be difficult for us to withstand another few quarters of super-preferred performance. Now, we not only cannot accept this evaluation but also no longer uphold the logic behind this rating."