BMO Capital Reiterates Buy Rating on Microsoft (MSFT) Stock

Core Viewpoint - Microsoft Corporation (NASDAQ:MSFT) is recognized as a strong investment opportunity, particularly due to its robust growth in the Azure platform and overall cloud services, despite a slight reduction in the price target by BMO Capital from $650.00 to $625.00 [1][2]. Group 1: Financial Performance - In Q1 2026, Microsoft reported Intelligent Cloud revenue of $30.9 billion, reflecting a 28% increase, with Azure and other cloud services revenue rising by 40% (39% in constant currency) [2]. - The overall Microsoft Cloud revenue reached $49.1 billion, marking a 26% increase (25% in constant currency) [3]. - The commercial remaining performance obligation surged by 51% to $392 billion, indicating strong future revenue potential [3]. Group 2: Operational Efficiency and Investment - Microsoft has demonstrated impressive margin expansion, showcasing operational efficiency despite facing headwinds [3]. - The company has invested heavily in capital expenditures, establishing over 2 gigawatts of data center capacity in the past year, with gross property, plant, and equipment reaching nearly $370 billion, up $260 billion from fiscal 2020 [4]. - Gross cash flow increased significantly from $60 billion annually in 2020 to over $140 billion in 2025, reflecting attractive returns on capital in the high 20s [4]. Group 3: Market Outlook - The potential of AI is highlighted as a key driver for long-term growth and durable opportunities within Microsoft's portfolio, supporting a favorable outlook for the company [3].