Microsoft: Azure Growth Makes The Stock A Steal

Microsoft delivered robust Q4 results on Wednesday, with Intelligent Cloud revenue surging 32% year-over-year and total revenue up 18% year-over-year. MSFT's aggressive AI CapEx ramp—up 110% to $35.8B in Q4—supports accelerating cloud and AI infrastructure growth. However, free cash flows are set to continue to compress. At a 17.3x P/E, MSFT trades well below cloud peers, offering ~$80B in annualized free cash flow and significant upside potential. I see 45% upside to $565/share, driven by Azure momentum and strong free cash flow despite elevated CapEx.

Microsoft (MSFT) delivered an impressive earnings scorecard for its fourth fiscal quarter on Wednesday that highlighted once more strong momentum in its cloud division, with Intelligent Cloud reporting a solid 32% year-over-year top line growth rate. Microsoft is