KeyBanc analysts said Microsoft Corp (MSFT) - Get Microsoft Corporation Report will dethrone Amazon.com (AMZN) - Get Amazon.com, Inc. Report Web Services to become the "king of the cloud" this quarter.
Analysts reiterated an "overweight" rating and increased their price target for the software giant to $82 from $78. The new target implies a 10% upside from Thursday's closing stock price.
Microsoft's commercial cloud revenue increased 56% year over year, which exceeded KeyBanc's estimates by about $2 billion. "The sheer size and accelerating pace of cloud growth increases our confidence in the bull-case scenario that Microsoft Cloud can quickly scale north of a $50 billion segment by 2021."
KeyBanc lowered GAAP earnings per share estimates, writing that outsized growth in cloud investments "more than justifies" a higher stock-based compensation that will put pressure on margins.
Microsoft stock was slightly up in premarket trading.
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