Microsoft(US:MSFT) ZACKS·2025-07-28 17:01Core Insights - Microsoft's fourth-quarter fiscal 2025 results are anticipated to be driven by steady growth in its cloud platform, Azure, amidst competitive pressures from other tech giants [1] - The company's strategic investments in AI infrastructure and an expanding partner ecosystem are expected to create multiple tailwinds, particularly benefiting the Intelligent Cloud division [2] Intelligent Cloud Segment - The Intelligent Cloud segment is projected to remain Microsoft's primary growth engine, with revenue estimates between $28.75 billion and $29.05 billion for the fourth quarter, indicating approximately 21% growth year-over-year [3] - Azure is expected to show revenue growth of 34% to 35% in constant currency, primarily due to sustained momentum in AI services adoption [4] AI Services and Capacity - Microsoft faces AI capacity constraints, reflecting extraordinary demand for Azure AI services, with AI contributing 16 points to Azure growth compared to 13 points in the previous quarter [5] - Azure's outperformance is attributed to both AI and non-AI services, showcasing the platform's broad-based strength [6] Enterprise AI Adoption - The Microsoft Build 2025 event unveiled transformative capabilities that likely accelerated customer commitments, enhancing Microsoft's competitive advantages in AI [7] - New agentic AI capabilities expanded the total addressable market for Microsoft's AI services, leading to higher-value contracts and deeper platform integration [8] Microsoft 365 Copilot - Microsoft 365 Copilot is expected to continue gaining traction, with management guiding for approximately 14% growth in M365 commercial cloud revenue in constant currency for the fourth quarter [9] - The fourth quarter benefited from promotions and new capabilities, strengthening Microsoft's competitive position in productivity software [10] Commercial Fundamentals - Microsoft entered the fourth quarter with a commercial remaining performance obligation of $315 billion, up 34% year-over-year, providing substantial revenue visibility [11] - Strong commercial bookings growth is anticipated, supported by core annuity sales execution and new contract signings [12] Investment Thesis - Microsoft's guided increase in capital expenditures reflects confidence in sustained demand, with a revenue range of $73.15 billion to $74.25 billion, significantly exceeding consensus estimates [13] - The company's strengths in Azure AI acceleration, expanding Copilot adoption, and strong enterprise commitments make the stock increasingly compelling for investors [14]