Copilot+Azure solidify their leading edge, Citigroup reiterates a "buy" rating for Microsoft Corporation (MSFT.US).

On Friday, Citigroup reiterated its "buy" rating on Microsoft Corporation (MSFT.US) in its latest research report, believing that the momentum of the Copilot business continues to strengthen and the fundamentals of Azure cloud business are solid, further solidifying the company's leading position in the enterprise AI software field. Citigroup analyst Radke stated in a report to clients that recent meetings with Microsoft Corporation's investor relations team have released multiple positive signals. Management responded to questions regarding competitive landscape, Microsoft Corporation's strategic positioning after adjusting its relationship with OpenAI, computing power and capacity allocation, as well as capital expenditure path, which are concerns for investors. The report pointed out that the communication effectively alleviated market concerns about competition with Claude, collaborative office tools, and the allocation of Microsoft Corporation's AI resources. In terms of business progress, management's statements further confirm the continuous improvement in Copilot adoption rates. Citigroup believes that Copilot has become the main growth driver for Microsoft 365 commercial business and is gradually surpassing the E5 package in terms of pulling effect. Meanwhile, the Azure cloud business is still constrained by computing power supply, but the company has established a clear resource allocation framework to support the orderly growth of AI-related demands. In terms of profitability, Microsoft Corporation remains optimistic about the sustainability of the long-term profit margin for Azure. Management pointed out that with the in-house Maia chip, software and throughput efficiency improvements, and continuous optimization of the Large Language Model (LLM), operational efficiency is expected to further improve; at the same time, the broader AI overall services market will also provide support for growth. In the short term, the company will focus more on improving free cash flow and gross profit margin scale. Citigroup concluded that this exchange has strengthened its constructive view on Microsoft Corporation's long-term prospects. With its comprehensive advantages in data, workflows, and security, Microsoft Corporation is poised to continue expanding its competitive advantage in the AI-driven enterprise software market and consolidate its industry leadership position.