TD Cowen Keeps Buy on Microsoft (MSFT) Despite Softer Azure Growth

Microsoft Corporation (NASDAQ:MSFT) is included among the 15 Best Wide Moat Dividend Stocks to Invest in.

TD Cowen Keeps Buy on Microsoft (MSFT) Despite Softer Azure Growth

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On January 29, TD Cowen trimmed its price recommendation on Microsoft Corporation (NASDAQ:MSFT) to $610 from $625. It kept a Buy rating on the stock. The firm pointed to softer Azure growth, though guidance held up. Demand continues to exceed supply, forcing Microsoft to carefully manage capacity across first-party inference, internal R&D, and Azure services.

The latest quarter showed why expectations remain high. Microsoft posted $81.3 billion in revenue, up 17% year over year and nearly $1 billion ahead of forecasts. Earnings per share came in at $4.14, up 24% and $0.22 above estimates. Net income stood out, jumping 60% to $38.5 billion.

Margins dipped slightly as spending increased, but cash generation remains strong. Xbox Content and Services was the only segment to post a decline, down 5% for the quarter. One number that keeps coming up in conversations is backlog. Microsoft now has $625 billion in future contracted revenue. That figure usually signals strength, but there is a wrinkle. About $281 billion of that backlog is tied to OpenAI. Cloud services are not like digital platforms, where capacity scales easily. Every new Azure customer requires real infrastructure, real power, and real space.

Right now, Microsoft is running into limits. Demand is ahead of available capacity, which helps explain the large backlog. It is a good problem in one sense, though it does place a ceiling on how fast Azure can grow in the near term. Even so, Azure revenue still rose 39% in the quarter. Growth may cool from here, but at Microsoft’s scale, that pace remains meaningful.

Microsoft Corporation (NASDAQ:MSFT) develops and supports software, services, devices, and technology solutions across enterprise, consumer, and cloud markets.

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Disclosure: None.