Morgan Stanley is bullish on Microsoft Corporation (MSFT.US): The third-quarter report will "regain market narrative," maintaining the "buy" rating.

Microsoft Corporation (MSFT.US) will announce its third quarter earnings on April 29th. Morgan Stanley believes that, due to investors remaining cautious for various reasons, this tech giant may seek to "regain market momentum". Morgan Stanley analyst Keith Weiss has a "hold" rating on Microsoft Corporation with a target price of $650. In a report to clients, Weiss wrote, "Microsoft Corporation showed strong commercial demand at the end of the second quarter of fiscal year 2026, but investor focus remains on supply constraints and GPU allocation constraints on Azure growth, as well as growing concerns about Copilot's competitive position relative to AI Labs. Last quarter, Microsoft Corporation achieved double-digit revenue growth and expanded operating profit margins. Forward-looking indicators such as 110% year-over-year growth in RPO (approximately $625 billion) and 39% year-over-year growth in cRPO indicate that its commercial product portfolio will continue to maintain strong momentum. Looking ahead to the third quarter of fiscal year 2026, Azure's growth still depends on capacity availability rather than demand. Meanwhile, Microsoft Corporation continues to heavily invest in artificial intelligence infrastructure, with capital expenditure primarily focused on assets (GPU/CPU) that generate revenue in the short term." He stated that achieving an Azure growth rate of around 39% would be "clearly seen as" positive news, especially considering he believes this target is achievable. Weiss added, "Additionally, improvements in the Copilot product will boost market sentiment, and with the addition of 15 million paying Copilot users in the last quarter as a key performance indicator, Microsoft Corporation continues to maintain growth momentum as it expands its user base." Weiss also mentioned that besides Azure capacity (which Microsoft Corporation will allocate to internal and external users), other factors worth noting include gross profit margins, operating profit margins, and the level of resource constraints on Azure.