Microsoft's (MSFT) Azure cloud computing platform faced "rare execution challenges" as the technology giant reported mixed fiscal Q2 results, BofA Securities said Thursday in a report.
Azure revenue growth at 31% in Q2 was at the low end of guidance amid hurdles in the broad partner channel, BofA said. Challenges "appear fixable, though will impact revenue in the coming quarters," while AI workloads and large direct cloud deals "remain solid," the report said.
The Q3 outlook for Azure growth of 31% to 32% is "a much anticipated acceleration, though disappointing in light of softer Q2 growth," BofA said. Meanwhile, Microsoft 365 Copilot "is becoming a material source of upside," the report said.
"Microsoft is well positioned to generate sustained low double-digit growth in the coming three to five years, led by continued adoption of Azure cloud infrastructure platform, cloud-based Office 365 productivity suite, and more profitable Games and Game Pass revenue in Xbox," the report said.
BofA reiterated its buy rating and $510 price target on Microsoft stock as the company "represents an AI winner in both apps and infrastructure."
Analysts including Morgan Stanley and BMO Capital cut their price targets on the stock.
Microsoft shares fell 6% in recent Thursday trading.
Price: 415.83, Change: -26.47, Percent Change: -5.98