UBS Analysts Maintain Neutral Rating on Microsoft

UBS REDUCES ESTIMATES ON MICROSOFT DUE TO “TOO HIGH” AZURE GROWTH EXPECTATIONS, RESULTING IN A 2% DROP IN STOCK PRICE.

UBS analysts have maintained a Neutral rating and a price target of $275 per share on Microsoft (NASDAQ: MSFT), citing concerns that Azure estimates are still too high. The analysts have conducted around 20 checks with Azure and AWS customers, and their conclusion is that the 2023 estimates for AWS, Azure, and Google’s Cloud are too high. They believe that customer efforts to optimize and trim their cloud spend will persist at a high level throughout 2023.
According to UBS, recent trends such as spend optimization/cuts, slower migration, and new developer activity, have continued into 1Q23 and seem worse than three months ago. As a result, UBS has revised its cloud segment growth estimate to 24% in the June quarter at a constant currency, lower than the prior estimate of 25% and the Street’s 27%.
Regarding the upcoming earnings call, the analysts expect that Microsoft might guide to double-digit EPS growth, but a double-digit revenue growth outlook seems unlikely. Additionally, they suggest investors pay attention to any comments about Microsoft’s OpenAI investment and monetization plans, which could have an impact on the stock.
Microsoft’s shares have declined by nearly 2% today.

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