Oppenheimer's Brian Schwartz sees more upside for Microsoft following record high
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Microsoft's (MSFT) has been a dark horse this year, as its cloud and AI engines continue to fire. Be it Azure's dominance, Copilot's spread, or its massive data center bets, Microsoft is marching forward with considerable aplomb. Don't miss the move: Subscribe to TheStreet's free daily newsletter Despite the uncertainty, it has kept pushing the pace, posting strong guidance, winning fresh analyst upgrades, and firmly holding its spot at the top of the tech hierarchy. All things point to more upside for Microsoft stock, and that's exactly why a fresh Wall Street upgrade just dropped jaws, setting a price target that's adding another massive chunk to its already giant market cap. Image source:Microsoft's Azure cloud has been doing a lot of heavy lifting, and the numbers prove it. For context, in the third quarter of fiscal 2025, Microsoft's Intelligent Cloud sales hit $26.8 billion, up 21% year-over-year. Strip out forex-related swings, and that growth jumps to 22%. At the core of it all is Microsoft's dependable Azure and its other cloud services, which posted an incredible 35% quarterly growth in constant currency. Nearly 50% of that jump came directly from AI workloads. Add it all up, and Microsoft's total cloud sales have soared to $42.4 billion, marking a 20% gain. Related: Wall Street giant issues stark message on S&P 500 Moreover, robust infrastructure-as-a-service (IaaS) demand is pushing the company's capacity to the limit in key regions, indicative of Azure's infrastructure muscle. Currently, Azure commands roughly 23% to 25% of the global cloud market share. That's closing in on Amazon Web Services' 29%, while Google Cloud trails behind at around 12%. Microsoft's commercial bookings are also through the roof, up 67% year-over-year to roughly $300 billion in locked-in contracts offering some serious revenue visibility. Management's outlook is just as strong. For Q4, it's targeting Intelligent Cloud sales of $28.75 billion to $29.05 billion, with Azure growth pinned at roughly 34% to 35%. Demand hasn't shown signs of much easing, even as supply constraints bite. More Tech Stock News: TikTok's next move has Google and Meta sweating bulletsCathie Wood shells out $13.9 million for one high-stakes biotech stockApple's quiet shake-up could redefine its future Profitability is surging, too. Last quarter's earnings per share came in at $3.46, blowing past Wall Street's expectations and reflecting healthier margins from Azure's scale. Needless to say, it has been nothing but success since CEO Satya Nadella's pivot to the cloud in 2014, with Microsoft pouring $80 billion into data-center buildout. Also, its tight partnership with OpenAI and its investments in Copilot AI are starting to pay off. Piper Sandler just bet big on Microsoft's cloud momentum, and its fresh $600 price target is a testament to that. The research firm bumped its target from $475 to $600 on July 10, a massive jump from Microsoft stock's current price of around $504.80, flirting with the $4 trillion club. Piper Sandler touts Microsoft's growing grip on the cloud, especially in IaaS, pointing to new survey data that shows Azure spending intentions hitting record highs. For the first time, over 80% of chief information officers told Piper they are looking to raise spending on Azure. That cements Microsoft as the leading cloud and AI infrastructure pick for major companies. Related: Cathie Wood drops bold message on Apple, Tesla stock It's not a fluke, either. Net spending intentions for Azure have risen, considering in Piper's last four surveys, from 60% to 66%, then 77%, and now 81%. That's a superb climb that shows enterprise commitment is sticking, as its rivals fight for market share. Moreover, the firm is baking in stronger operating cash flow margins, up to 51.8% from 47%, applying a 26-times multiple on 2030 estimates, then discounting back three years. Backing up the bullish call, BMO Capital also lifted its price target on Microsoft, though not quite as aggressively. BMO sees Microsoft stock surging to $550, up from $485, due to steady Azure usage and upbeat feedback from cloud experts. Still, we're seeing stable consumption and aggressive pricing from VMware, which helps with cloud migrations. BMO is holding its Azure growth forecasts steady for now, which doesn't hurt Microsoft's momentum. Related: Tesla's next bet could flip the robotaxi race The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
