Microsoft Corp (NASDAQ:MSFT) drew praise from analysts at Wedbush and Jefferies following its fiscal first quarter 2026 earnings report, with both firms highlighting AI-driven growth, robust cloud adoption, and operational strength as key drivers for investor confidence.’
Wedbush maintained an ‘Outperform’ rating with a 12-month price target of $625, emphasizing that Microsoft’s results mark the next stage of AI adoption.
The firm said this was a “robust quarter with strength in Azure front and center; AI revolution hits next gear.”
The analysts highlighted 39% year-over-year growth in Azure and $49.1 billion in Microsoft Cloud revenue, noting that “customers [are] continuously innovating across the tech stack, including more customers building AI apps and agents on its Azure infrastructure.”
Wedbush also flagged strong commercial bookings and backlog, writing that over 150 million monthly users are now engaging with Microsoft’s Copilot products.
On capex, the firm noted that “spend came in at $34.9 billion…with Microsoft fully committed to the AI buildout,” reflecting plans to aggressively expand data center capacity.
“This was another solid quarter by [Microsoft CEO] Nadella & Co putting the company well on its way to join the $5 trillion club over the next 18 months with the AI Revolution still in the early innings of playing out with Microsoft hitting its next phase of monetization on the AI front.”
Microsoft shares traded down 3% at about $525 in the early afternoon on Thursday on investor concern about the company’s plans to accelerate spending this financial year.
“Any knee-jerk reactions represent strong buying opportunities,” Wedbush concluded.
Jefferies also expressed optimism about Microsoft’s operational momentum and backlog growth.
The analysts highlighted Microsoft’s “soaring RPO,” with commercial RPO accelerating to 51% or $392 billion. They noted that “despite mega investments, operating margin came in at 48.9%, beating consensus and high end of guide at 46.8%.”
Free cash flow of $25.6 billion came in 33% ahead of expectations.
The firm also noted areas to watch, including capacity constraints for Azure, slowing M365 Commercial Cloud growth, and Copilot adoption, with investors watching for when this will drive a meaningful inflection in M365 revenue.