MSFT is a long-term optimistic opportunity driven by accelerating demand and Azure momentum, but currently has a neutral valuation.

Yes, Microsoft is a stock we've been optimistic about for some time now. Finally, the stock started to align with our expectations. In fact, when we look at overall demand for Microsoft, we find that it has increased by about 11% year-on-year.

This is an extremely large company. Therefore, we do not see huge movements in this annual percentage due to the large volume of data we analyze. But I would like to point out that this represents an acceleration compared to the last quarter.

In the last quarter, this percentage was up by about 7% year-on-year.

Based on our data, and when we look at the signals and insights we have, we see a strong adoption of artificial intelligence. Therefore, those contributing factors appear to be accelerating, as well as in the cloud sector.

When we look at Microsoft's performance compared to its peers in the cloud field, we see good superiority and strong momentum in "Azure", and we know that this is an area where we will get special insights in the next quarter.

Overall, we see continued positive drivers for Microsoft, which support the rise we have seen. I believe the stock has risen by about 32% over the past three months. This is consistent with our data, and we believe this trend will continue.

I think the company will announce its earnings at the end of the month. We'll see how trading goes from now until then, but currently we are seeing strong indicators. Is this perhaps based on the fact that all these companies using "Copilot" have added 10 million seats in the last quarter compared to the previous quarter, which means they are gaining some momentum there in the field of artificial intelligence?

Does your data reflect perhaps that other companies using Microsoft enterprise systems find it easier to switch to Azure Cloud because many Microsoft systems are already integrated into their software and technologies? Is this perhaps the reason?

Yes, that is exactly what we are observing. We are seeing a lot of updates within those enterprise categories, and I think this is really important for Microsoft's pricing power going forward.

You have companies that pay higher amounts for adding "Copilot". I think that the pricing for that category is 65% higher once you add the "Copilot", and when you start using it, you end up paying for consumption in addition to the cost of the seat itself.

Therefore, there is an expansion in this area, which directly benefits "Azur". So we see good momentum in this area.

So when we look at this, we see that the high tide lifts all the boats, but in terms of the growth rate this quarter compared to the previous quarter, we note a good improvement for "Azur".

Much of this is due to the way it was developed, the increased adoption of it by institutions, and their influx into its own ecosystem.

I must say I am surprised by the size of the difference between Azure, AWS and Google Cloud. I wonder if Azure is taking some of the market share from Google Cloud.

That may be the case. This is certainly the direction our data is currently trending towards. But I think overall this is still an area of growth for all companies, and that Google Cloud’s interest may see a slowdown in its growth rate compared to the last quarter.

This is how we interpret this data, and the huge leap you see in "Azure" is perhaps more likely to be an unexpected leap. We have seen this in Azure's growth rate even during the past few quarters.

I believe that revenue growth in the last quarter was about 43% higher year-on-year, and that was a consecutive increase over previous quarters. So we continue to see this acceleration here, while we don't necessarily see this acceleration in Google Cloud.

Therefore, I think it's important to note that there's a significant escalation we're currently observing at Microsoft that we haven't necessarily seen at the other companies we track.

Megan, a quick follow-up question regarding one of your charts where demand is up 11% year-over-year, but the stock price is lagging behind your data. This is a 47% jump from those low levels in June.

I mean, this stock has dropped below $350. Are you still positive about it?

We will get some clarity on the 28th when the earnings are announced, but are you still optimistic about it? Yes. We have a few different ratings we can look at. When we look at a company in the long term, we have an overall index of around 84, which for us is an indicator of optimism.

So, we are optimistic about this company in the long term, but if you look at the earnings valuation I prepared today, it was at 11, which is completely neutral. Therefore, we believe that stock and demand are currently going hand in hand.

When we look at what we call mainstream demand, i.e., consumer demand versus investor demand, the gap is very small. I think there are only about six points where Main Street is superior to Wall Street, as far as we can tell.

So, to us, this seems like a reasonably priced stock.

It will be interesting to see how it trades over the next month ahead of the earnings announcement. But I would say that in the long run we believe this is an optimistic opportunity even at these levels, because we are still in the very early stages of Microsoft rolling out its suite of AI tools for enterprises.

I think one of the things that really surprised me as I delved into this research is that Copilot's adoption rate is still only at 6.5% of its total commercial customer base. So there is still plenty of room here, at least from the consumer side that we are monitoring.

So, we are certainly optimistic in the long term, but as we get closer to the earnings announcement, that gap for surprises is shrinking. So, technically speaking, at the moment we are somewhere between neutrality and cautious optimism and we will see how things turn out between now and then.