Microsoft (MSFT) has been a bullish call for a while, and the stock is now catching up to that view. Overall demand for Microsoft sits up about 11% year-over-year. For a company this large, big year-over-year swings are rare because of the huge amount of data taken in, so 11% marks a clear speedup from last quarter's 7% year-over-year reading.
The data tracks consumer mentions, web visits, and similar signals. It shows strong AI adoption and rising cloud demand. Those tailwinds look to be speeding up. Over the last 3 months the stock gained about 32%, which matches what the demand data shows. From its June lows the stock has jumped 47%; it had dropped below $350. Microsoft reports earnings on October 28.
Azure beating its cloud rivals
On a year-over-year demand growth basis, Azure is outperforming its competitors. Amazon Web Services (AMZN) is only slightly positive, and Google Cloud Platform (GOOGL) is down 4%. The gap between the three is surprisingly wide.
The driver is enterprise upgrades. Companies already running Microsoft's enterprise systems find it easy to use Microsoft for cloud, since much of their software is already built on Microsoft's technology. Copilot is pulling this along - 10 million seats were added last quarter over the prior quarter. Adding Copilot raises tier pricing by about 65%. Once a company starts using the agent features, it also pays for usage on top of the seat cost. That expansion feeds straight into Azure, building pricing power for Microsoft going forward.
On a mind-share basis, AWS is still the massive player. The demand figure is a momentum gauge, not a measure of size. A rising tide is lifting all these cloud businesses, but Azure shows a clear uptick this quarter versus last. Azure's revenue growth came in about 43% higher year-over-year last quarter, up from prior quarters in a row, so the speedup is building.
Azure may be pulling some business away from Google Cloud. The data leans that way. Google Cloud's pullback reads more as a slowdown in its growth rate from last quarter than an outright decline, since cloud is still a growth area for all these firms. Azure's big jump reads as an unexpected surge. Google Cloud is not showing the same acceleration. This ramp in Microsoft stands out against the other tracked companies.
Still bullish long-term, neutral into earnings
Is Microsoft still a buy? Long-term, yes. The overarching long-term indicator sits at about 84, which is bullish. The earnings score, generated today, sits at 11, which is fairly neutral. Stock and demand are in near lockstep right now.
Looking at "main street" demand (consumers) versus investor demand, the gap is only about six points, with main street slightly leading Wall Street. That makes the stock look priced about right, so the next month into earnings will be worth watching.
One surprise from the research: Copilot adoption is still only 6.5% of Microsoft's overall commercial base. That leaves a lot of room to grow, and Microsoft is still in the early phases of rolling out its AI suite to enterprises. Long-term the stance stays bullish even at these levels. But with the gap shrinking, the chance of an earnings surprise is lower, so the near-term read is neutral to cautiously bullish into the October 28 report.
One more call worth noting: a bearish view on Nike (NKE) held up even with demand ticking up. Some of that demand interest likely came from heavy discounting. Nike is discounting again now because it has to move merchandise.
