Bank of America Merrill Lynch: Raise Microsoft's target price to $515, strong third quarter financial report and outlook.

Bank of America Securities' research report states that Microsoft's strong performance in the third quarter financial report and outlook is mainly attributed to the cloud computing service Azure. Azure performed outstandingly in the quarter, growing by 35% in constant currency, far exceeding the median expectation of 31.5%. While benefiting from the delivery of graphics processors and central processing units during the quarter, the robust execution of core cloud migration transactions also made a significant contribution. OpenAI drove Azure's growth by 16 percentage points, which should alleviate concerns about slightly strained collaborative relationships. Bank of America Securities says that with accelerating growth, peak capital expenditure, and the scale efficiency driven by artificial intelligence, it predicts that Microsoft's free cash flow growth will accelerate to nearly 20% by the 2027 fiscal year. The bank has raised Microsoft's target price from $480 to $515 and reiterated a "buy" rating.