Microsoft's (MSFT) Azure and Microsoft 365 cloud businesses can sustain acceleration in fiscal 2027 as Copilot monetization remains strong, Oppenheimer said Tuesday in a report.
More compute capacity coming online and customers increasingly standardizing on Microsoft as their primary enterprise AI platform should further support growth, the report said.
While investments in AI may pressure Azure's near-term margins, improving utilization, disciplined operating spending and a growing enterprise backlog are expected to support margin expansion as capacity increases, Oppenheimer said.
Microsoft's positive free cash flow guidance for fiscal 2027 signals management's confidence in sustaining profitable growth, the report said.
Oppenheimer increased its price target on Microsoft stock to $570 from $515 and reiterated its outperform rating.
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