Microsoft Corp. (MSFT): 1QFY27 First Take

MSFT is indicated up 4% after market after reporting 1Q27 results: Azure revenue was +48% cc yoy (vs. guidance of 44-45% cc and acceleration vs. 42% cc in 4QFY). The stock reaction likely reflects the positives of solid Azure growth, acceleration in Commercial Cloud, and a moderate inflection in Cloud gross margin to 66% (vs. 65% in 4QFY). We expect the key focus on the call to be the timing and magnitude of Azure growth through FY27, alongside updates on 1P vs. 3P compute allocation and visibility into 2027 capacity additions. Total revenue came in 2% above the Street with growth of 19% cc, adjusted EPS of $4.89 was 3% above the Street, and capex of $45.2bn grew 30% (vs. Street at 48%). We maintain our Buy rating and 12-month price target of $640, based on a 28x P/E multiple to Microsoft's SNTM adjusted net income.