Microsoft's (MSFT) Azure and Copilot are key fiscal Q4 drivers, supporting the company's high-teens total return profile, Morgan Stanley said in a Thursday note.
Talks with channel partners indicated a "constructive" quarter for Microsoft, driven by durable demand across its commercial portfolio as evidenced by ongoing cloud migrations and expanding Azure AI deployments, among others, the investment firm said.
Azure is estimated to grow around 41% in Q4, while checks back strong Microsoft 365 Copilot momentum, Morgan Stanley said, noting that both Azure and Copilot are set for inflection. Azure's outperformance should be sustained by incremental supply over the near to medium term as demand remains robust, the investment firm added.
Microsoft is set to release its fiscal Q4 results on July 29.
Morgan Stanley has an overweight rating and $600 price target on Microsoft.
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