HSBC maintains a Buy rating on Microsoft, noting strong Azure-led growth despite near-term capital expenditure pressures. The report forecasts a FCF bottom in FY2027 followed by significant long-term growth.
Key Takeaways
- 1.Maintaining Buy rating for Microsoft with a lower target price of USD567 due to near-term estimate revisions.
- 2.Azure cloud growth remains the primary driver of revenue, expected to maintain strong momentum.
- 3.Free Cash Flow (FCF) is expected to trough in FY2027 before recovering significantly by FY2030.
Table of Contents
- Azure should continue driving strong growth
- Capex and asset turnover to remain in focus
- FCF should bottom out in FY27e
- Attractive valuation
- Disclosures & Disclaimer
- Financials & valuation: Microsoft
- Financial statements
- Ratio, growth and per share analysis
- Key forecast drivers
- Valuation data
- ESG metrics
- Issuer information
- Price relative
- Evolution of results
- Cloud infrastructure providers: Comparative asset turnover, margins and ROIC
- Normalization of unusual asset pattern to partially offset rising share of GPU's
- Composition of gross PP&E: IT equipment vs data centers, et al.
- FCF to bottom in FY2027e
- Microsoft: Summary sheet
- Changes to our estimates
- HSBC estimates vs consensus
- Disclosure appendix
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Authors
Stephen BerseyAbhishek ShuklaSameer Lam
Securities
MSFTCRWVORCL
Themes
AI-driven Capital ExpenditureCloud Infrastructure Asset TurnoverFree Cash Flow Stabilization
Regions
North AmericaUnited States