Citigroup analyst Tyler Radke maintained Microsoft Corp (NASDAQ:MSFT) with a Buy and lowered the price target from $480 to $475.

The analyst remained positive on Microsoft ahead of third-quarter results as his quarterly inputs point to strengthening Azure growth trends boosted again by AI services, with solid CoPilot interest, though more bite-sized deals initially.

Radke's strong inputs and a more positive PC backdrop against conservative guidance should yield room for upside across key KPIs (including Azure, which should reaccelerate), while he expects continued cost discipline to drive strong EPS upside.

BofA Securities analyst Brad Sills reiterated a Buy rating on Microsoft with a price target of $480.

Following a round of calls with nearly a dozen key Microsost partners, the analyst expects a healthy 1% upside to his third-quarter revenue estimate of $60.5 billion, stemming from sustained strength in Azure and M365.

The analyst expects FX to provide a 50bps tailwind to revenue growth, primarily in line with expectations heading into the quarter.

He expects a 1% upside to his estimate for Azure growth of 28.0% cc, given positive system integrator partner feedback suggesting stable, healthy migration of new workloads to the cloud platform, relative strength in the Microsost security stack, and ramping usage of Azure AI and Microsost security stack.

Sills expects a $220 million upside to his PBP segment revenue estimate to $19.5 billion from better Commercial Office growth, driven by better ASP (average selling prices) on sustained E3/E5 strength and early traction with M365 copilot. Channel feedback suggests some uptick in Copilot activity, primarily in the pipeline, but also early adoption.

The analyst expects $50 million of downside to his MPC revenue estimate of $14.9 billion, driven by weaker PCs in the calendar first quarter.

IDC reported preliminary first-quarter PC growth of +2% Y/Y versus its prior expectation for +4% Y/Y when Microsost provided guidance.

Sills noted that the next AI catalyst for Microsost shares will prove that critical AI-related product cycles are gaining traction via incremental growth metrics such as M365 Copilot users or via accelerating Commercial Office ASP (from 6% to 7%). Microsost's shares are pricing in AI-driven revenue and FCF acceleration, per the analyst.

However, he noted the multiple holding with an AI cycle that is gaining momentum given the scale of the AI opportunity (IDC sizes the AI market to $944 billion by 2027). As per Sills, the stock should then compound at the FCF growth rate, accelerating toward the low 20s, with incremental contribution from AI in the coming quarters. The analyst noted Microsost as a top pick in sostware.

Microsoft stock gained over 40% in the last 12 months. Investors can gain exposure to the stock via IShares Global Tech ETF (NYSE:IXN) and Vanguard Information Tech ETF (NYSE:VGT).

Price Action: MSFT shares traded lower by 1.5% at $405.40 on the last check Thursday.

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