BUZZ-Street View: Microsoft's cloud outlook a 'short-term blip'

Microsoft MSFT.O on Wednesday forecast disappointing growth in its cloud computing business, worrying investors about big spending, elusive artificial intelligence revenue and competition from cheaper AI models from China

Shares down 3.73% in premarket trading

SHORT-TERM HEADWINDS PERSIST

Barclays ("overweight," PT: $475) sees a pause in MSFT shares in the short term as the H2 reacceleration story for Azure is not playing out

However, brokerage says the long-term story remains intact as the Azure-AI business continues with high growth and Copilot is helping drive better Office results

J.P.Morgan ("rating," PT: $465) says the Azure-acceleration story has been "hit by shrapnel" and is losing altitude; adds "scaling laws & scale motions in focus" for MSFT

Morgan Stanley ("overweight," PT: $530) says while Azure was disappointing, strength in the generative AI ramp vs moderating capex growth should support accelerating FY26 free cash flow growth

Evercore ISI ("outperform," PT: $447.20) says "the explosion in commercial bookings due to Azure and OpenAI commitments speaks to the potential acceleration in Azure in F2H"