More rational competitive pricing environment benefiting Microsoft Azure, says Wells Fargo
Wells Fargo analyst Phil Winslow attended Microsoft's Build developer conference and met with senior finance executives from Microsoft's Cloud and AI, Windows, Business Apps, Worldwide Commercial Business, Xbox, and Office organizations at the company's Redmond headquarters, which reinforced his belief that the competitive pricing environment in the cloud has been more rational than 2-3 years ago. The analyst expects this to continue to benefit not only Azure revenue growth but also gross margin and capital spending ratios. Furthermore, although revenue growth for on-premise server products delivered in the recent quarter is likely at peak levels, Microsoft's executives expressed confidence in the forward demand for hybrid offerings-benefiting its business both in the cloud and on-premise, he adds. The analyst reiterates an Outperform rating on the shares.