December quarter checks for Microsoft’s Azure ‘stable,’ says Wedbush

Wedbush analyst Daniel Ives notes that Microsoft’s stock has already reflected a clear slowdown in cloud and a disaster PC market over the last few quarters. His thesis remains that the cloud and underlying Office 365/Windows ecosystem is going to comprise a bigger and bigger piece of Redmond going forward and will ultimately spur growth and margins into 2023/2024 despite this downturn. Ives further believes the shift to cloud is still less than 50% penetrated and represents a massive opportunity for Nadella & Co. going forward despite the dark storm clouds forming for 2023 in the uncertain macro backdrop. His recent conversations with customers and partners underscore his confidence that Microsoft can ride out this economic storm and ultimately be in a stronger position in the other side with cost cutting and strategic measures already in place. While Azure growth has clearly decelerated in the field, Ives thinks Microsoft should be able to exceed its 37% Azure growth target in the December quarter when Redmond reports earnings in late January. He has an Outperform rating on the shares with a price target of $290.