Microsoft results better than feared, macro trends weakening, says Oppenheimer

Oppenheimer analyst Timothy Horan notes that Microsoft met muted Q2 expectations, with the important Azure cloud segment achieving 38% constant-currency growth, 1% above guidance. However, trends weakened in December and continued, so management forecast Azure’s growth rate for Q3 to "4%-5% below December’s mid-30s exit run-rate," 1% below the firm’s model, but possibly better than pessimistic buy-side estimates, Oppenheimer says. The company declined to forecast when customers will finish "optimizing" workloads, but the firm believes cloud growth will be tempered for another two to three quarters with the poor economy. Positively, this sluggishness will inevitably pass, both FX and COVID comps easing, and Microsoft is methodically consolidating share, bundling security and other value-added services, the firm adds. Oppenheimer has an Outperform rating on the shares with a price target of $265.