Microsoft Corp. Update on Azure, Capex and M365

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Microsoft Corp. Update on Azure, Capex and M365

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Microsoft Corp. Equities

United StatesUpdate on Azure, Capex and M365

Software

12-month rating Buy

Summary

As we approach Microsoft’s 4Q/Jun print this week, we offer our fresh thoughts on 12m price target US$480.00

Azure and M365/Office growth based on a dozen or so recent conversations with Prior : US$510.00

Microsoft customers and partners, in addition to updating our view on FY27 capex,

Price (24 Jul 2026) US$381.70

margins and the impact of AI model-layer trends such as token optimization and open

models on Microsoft. Bottom line, we remain BUY-rated but are more tactically balanced RIC: MSFT.O BBG: MSFT US

into this print.

Trading data and key metrics

52-wk range US$542.07-352.83

Updated Views

Market cap. US$2,842b

We’re eyes-wide-open to the reality that the Street is not rewarding the stocks of AI infra

Shares o/s 7,445m (COM)

providers that signal higher capex spend and/or don’t post upside to cloud revs growth

Free float 90%

and margins (see Oracle and Google). While Azure/AWS demand appears to be very

healthy and the GitHub Copilot pricing change offers a modest Azure growth rate Avg. daily volume ('000) 39,099

boost, capacity constraints on external customers and early token optimization efforts Avg. daily value (m) US$15,658.4

could limit the potential for material Azure guidance upside, while capex estimates Common s/h equity (06/26E) US$450b

could move higher on MT demand and memory inflation. We’re raising our FY27 capex P/BV (06/26E) 6.3x

estimate from $234b to $261b. On the M365/Office side of the house, we are getting Net debt to EBITDA (06/26E) NM

more comfortable, partly due to Copilot/Cowork improvements, but more because of