Microsoft Earnings Beat, Dow Inc Upgraded by JPMorgan

Key Takeaway

• Microsoft's Q3 earnings beat expectations, driving shares up 4%, with significant growth in Azure and cloud services.
• Barclays and Wells Fargo raised price targets for Microsoft to $475 and $500, respectively, citing strong AI demand.
• JPMorgan upgraded Dow Inc to overweight with a $61 target, noting potential upside from rising oil prices and solid dividend yield.

Microsoft's Earnings Triumph

Microsoft's fiscal third-quarter results have captivated Wall Street, propelling shares up approximately 4% in premarket trading. The tech behemoth not only surpassed earnings and revenue expectations but also showcased significant growth in its Azure and other cloud services, outperforming the StreetAccount consensus. Analysts have responded positively, with several lifting their price targets in light of the company's performance and future prospects.

Barclays analyst Raimo Lenschow remains optimistic, maintaining an overweight rating and a $475 price target, buoyed by Azure's growth and Microsoft's capital expenditure investments to cater to strong AI-related demand. Wells Fargo's Michael Turrin raised his price target to $500, highlighting Microsoft's "impressive" results and the management's early FY25 outlook for double-digit revenue and operating income growth. JPMorgan's Mark Murphy and Morgan Stanley's Keith Weiss also adjusted their price targets upwards, citing cloud migration activity and AI innovation as key growth drivers.

Dow Inc's Favorable Outlook

JPMorgan has upgraded Dow Inc to overweight from neutral, with analyst Jeffrey Zekauskas increasing the price target to $61. This adjustment reflects an 8% potential upside, driven by rising oil prices and a solid dividend yield. Despite a modest year-to-date increase of 2.9%, Dow Inc is positioned for outperformance due to its advantageous raw materials slate and sensitivity to global economic activity and political tensions.

Microsoft's Strategic Moves and Market Reaction

Microsoft's strategic emphasis on Azure cloud services and AI innovation has been well-received by the market. The company's fiscal third-quarter achievements reflect a broader trend of accelerating digital transformation and cloud adoption across industries. Microsoft's commitment to AI, as evidenced by its investments and the hiring of AI industry veterans, underscores its ambition to lead in this transformative era. The stock's performance, up 6.1% year-to-date but experiencing a slight dip this quarter, mirrors the volatile tech landscape and the high expectations placed on leading firms to navigate and capitalize on AI advancements.

Street Views

• Raimo Lenschow, Barclays (Bullish on Microsoft):

  "Microsoft’s Azure growth continuing to reaccelerate, benefitting from AI workloads, and its ongoing capex investments to meet strong AI-related demand."

• Michael Turrin, Wells Fargo (Bullish on Microsoft):

  "MSFT delivered an impressive set of FQ3 results, w/ Azure, bookings, and margin upside … strong AI demand signals enabled mgmt to provide an early FY25 outlook for “double-digit” rev/OI growth."

• Mark Murphy, JPMorgan (Bullish on Microsoft):

  "The ramp up in cloud migration activity showed improvement in non-AI-related net-new cloud workloads. The company’s commentary on FY25 capital expenditures and margin commentary may keep a lid on the stock reaction for now."

• Keith Weiss, Morgan Stanley (Bullish on Microsoft):

  "Acceleration in Microsoft’s commercial bookings and Azure gives the clearest evidence yet of the tech company's AI dominance driving revenues and increasing share of the broader IT budget. With the AI innovation cycle just starting, we see plenty of runway for growth."

• Jeffrey Zekauskas, JPMorgan (Bullish on Dow Inc):

  "Dow Inc is capable of outperforming because it is a beneficiary of higher oil prices... its downside risk is cushioned by the existence of global political tensions."