Microsoft Likely to See Continued Azure Growth Momentum Amid Rising AI Demand, Truist Says

08:19 AM EDT, 10/26/2026 (MT Newswires) -- Microsoft (MSFT) is likely to see continued growth momentum in its Azure cloud computing business amid broad-based demand, while the technology giant's financial position gives it a competitive advantage over its rivals in the artificial intelligence ecosystem, Truist Securities said Monday. Truist expects Microsoft to "perform strongly" against its fiscal first-quarter guidance for Azure growth of about 45% year over year in constant currency, it said in a client note. The brokerage said the guidance reflects sustained demand for cloud infrastructure and AI workloads at considerable scale. Microsoft is scheduled to release its latest financial results after the markets close Wednesday. Truist also forecasts Azure to grow by at least mid-40% in the fiscal second quarter, with gains remaining elevated into the second half of the fiscal year, as more compute capacity comes online after the company added 1 gigawatt in the prior quarter. The brokerage's recent discussions with Microsoft showed the company is confident in the breadth and durability of the demand for Azure, which extends beyond frontier model developers to traditional cloud migrations, Truist said in its note. As such, the company doesn't see a potential moderation in the pace of frontier model development as a meaningful threat to the broader compute opportunity, Truist said. "Beyond Azure growth acceleration expected in (the fiscal first quarter), we are incrementally confident in Azure growth remaining elevated for longer," the brokerage wrote in the note. The brokerage also believes Microsoft's balance sheet health is a "stabilizer" amid recently growing concerns about the magnitude and sustainability of AI infrastructure spending. Credit markets continue to view the tech giant as a comparatively lower-risk borrower, with its five-year credit default swap spreads remaining the "tightest" among rival AI hyperscalers and infrastructure companies. Truist believes Microsoft's diversified earnings drivers, historically robust balance sheet and substantial operating cash generation give it "better-than-average" financial flexibility to maintain high infrastructure spending levels, especially as investors analyze the financing requirements related to AI development. The company's free cash flow prospects are also more robust versus its peers, despite the substantial capital needed for infrastructure expansion, Truist said. Microsoft is expected to generate about $16.5 billion in free cash flow in the 2026 calendar year and remain marginally positive at around $155 million in the subsequent year, the brokerage added. In comparison, Alphabet (GOOG, GOOGL), Amazon (AMZN), Meta Platforms (META), Oracle (ORCL) and SpaceX (SPCX) are projected to generate negative free cash flow, Truist said. "We believe Microsoft's ability to maintain positive free cash flow despite elevated infrastructure spending reflects the strength of its underlying operating cash generation and provides additional flexibility to fund ongoing investment internally," the brokerage said. Truist maintained its buy rating on Microsoft's stock and raised its price target to $600 from $575. Last week, BofA Securities said Microsoft's fiscal first-quarter earnings are expected to largely match Wall Street's estimates, supported by strong Azure revenue growth. Alphabet and Amazon are also scheduled to report results this week, while chipmaker Nvidia (NVDA) and iPhone maker Apple (AAPL) post their earnings in November.