Investing.com -- Bank of America says sentiment was improving on Microsoft Corporation (NASDAQ:MSFT) given strong growth drivers in its Azure cloud platform and Office suite. The brokerage maintained its "buy" rating and $510 price target, projecting a healthy Q2 revenue upside and accelerating momentum for FY25.
BofA forecasts Q2 revenue of $68.6 billion, with potential upside driven by steady cloud migration projects to Azure and continued E3/E5 upgrade cycles, particularly for security features tied to M365 Copilot adoption. Azure's year-on-year growth could reach 32.5% in constant currency under an upside scenario, fueled by robust contributions from AI.
“We expect Q2 results to drive better sentiment on the shares, given a likely Q3 Azure outlook for accelerating growth. Also, we think the company is likely to raise the FY25 margin outlook,” analyst said.
As Microsoft typically updates the full year margin outlook in Q2, analyst expect Microsoft to raise its annual margin outlook, building on 140 basis points of margin upside in Q1.
“With the core growth business accelerating from AI contribution (across both apps and infrastructure) and a better margin outlook, it should become more clear that the return on Azure capex is shaping up nicely”
Microsoft's shares, a top pick for BofA, could benefit further as the company continues to capitalize on AI-driven growth across applications and infrastructure.