CICC International: Raises Microsoft's target price to $601.5 and maintains a "buy" rating.

CM International published a research report indicating that Microsoft's revenue for the fourth quarter ending in June reached $76.4 billion, an increase of 18.1% year-on-year, exceeding the bank's and market consensus estimates by 3.6% and 3.5%, respectively. All three major business segments exceeded expectations; net profit increased by 23.6% year-on-year, reaching $27.2 billion, benefiting from improved operational efficiency in all business segments, exceeding the bank's and market consensus estimates by 9% and 8%, respectively. Core infrastructure business accelerated growth driven by large customers, with Azure and other cloud services revenue increasing by 39% year-on-year in the fourth quarter, outperforming the previous guidance of 34% to 35%. The bank raised its revenue and operating profit forecasts for Microsoft for the years 2026 to 2027 by 2% to 4% and 3%, respectively, to reflect better-than-expected growth in cloud services and productivity and business process business revenue. Based on the potential for profit growth and improved cash flow generation, the bank raised its discounted cash flow target price by 18%, from $510.3 to $601.5, corresponding to forecasted P/E ratios of 38.8 times and 33.6 times for the fiscal years 2026 and 2027, respectively, and maintaining a "buy" rating.