The Microsoft Corp (NASDAQ:MSFT) quarterly earnings published overnight and guidance from chief executive officer Satya Nadella were described by Wedbush analyst Dan Ives as a "masterpiece quarter/guidance and conference call that should be printed out and hung in the Louvre".
Having risen to an all-time high last week, the shares fell on Wednesday despite the Redmond, California company reporting strong fiscal second-quarter performance from its Cloud division helping quarterly revenue and earnings beat Wall Street expectations.
Wedbush raised its price target to $475 from the previous $450, maintaining an 'outperform' rating as Ives said Microsoft had exceeded expectations on both the top and bottom line.
Growth from the Azure cloud platform of 30%, above the Street’s 27% estimate, was a standout, driven by intense consumer demand for tech stacks updated with AI functionality.
"The AI revolution has begun," Ives said, hailing the "exploding" conversions of the ChatGPT-powered Copilot across the Microsoft ecosystem, thanks to the investment in OpenAI and ongoing partnership.
An 18% rise in revenue for the quarter was attributed by Ives to Microsoft's effective application of AI, with over 1.3 million paid Copilot users and 50,000 enterprises subscribed to Copilot, "as the company’s application of AI at scale is proving to be a jaw dropper success".
Looking ahead, the company provided a "solid" revenue guide for its third quarter as the company seeks to expand the bottom line while expanding profit margins through the year.
"We believe this is the start of a multi-year initiative aimed at generating significant AI use cases for customers across the enterprise landscape to gain further efficiencies while accelerating profitable growth with Redmond leading the charge in this potential $1 trillion opportunity," Ives concluded.