借助人工智能赋能产品实现增强的变现能力，实现稳健的云收入增长

Robust cloud revenue growth with enhancedmonetization in AI-empowered products Target PriceUS$636.30(Previous TPUS$601.50)Up/Downside21.0%Current PriceUS$525.76 Microsoft reported (30OctHKT)1QFY26(June year-end) results: revenue wasUS$77.7bn, up18.4% YoY (4QFY25: +18.1% YoY),3% better thanbothourforecast/Bloomberg consensus estimates,driven by anall-roundbeat in allthree business segments. Net profitwas up12.5% YoY to US$27.7bn,2%/1%better than our forecast andconsensus.Excludingtheearningsimpact frominvestment in OpenAI, EPS would grow 23% YoY.In the print, Microsoftdemonstrated its ability in delivering robust cloud revenue growth with highoperatingefficiency,andin drivingincrementalmonetizationfrom AI features ofCopilot services, in our view.Azure and other cloud services revenue growthcame in at40% YoY in 1Q,driven by ongoing strong demand,ahead of previousguidanceof37%.Management highlighted thatoverallcommercial bookingsincreased 112% YoY in 1Q, and commercial RPO increased to US$392bn (up51% YoY) with weighted average duration staying relatively stable at c. 2 years,which in our view speaks to ongoing strong demand and decent monetizationpotential to support revenue growth in the coming quarters. Meanwhile, the2.3ppts YoY expansion in OPM in 1Q suggests Microsoft can drive revenuegrowth in an efficient way.To account for the beat in results and better-than-expected operating efficiency gains whichwilllikelysustain, weliftFY26-28Erevenue/OP forecastsby1-2%/3-4%, andDCF-based TP by6% to US$636.3(was US$601.5), translating into 34.8x FY27E PE. BUY. USSoftware& ITServices Saiyi HE, CFA(852) 3916 1739hesaiyi@cmbi.com.hk Ye TAO, CFAfranktao@cmbi.com.hk Wentao LU, CFAluwentao@cmbi.com.hk Joanna Ma(852) 3761 8838joannama@cmbi.com.hk Stock Data Cloud revenuesustainedrobust growth momentum.IntelligentCloud(IC)segment recorded revenue growth of 28.2%YoY in 1QFY26 toUS$30.9bn(40% of total revenue),andAzure and other cloud serviceswithin thesegmentsawrevenue growth of40% YoY (4QFY25:39%), betterthan previous guidanceof 37%.Management guided for 26-27% YoYrevenue growth for IC in2QFY26, among which it guided for37% YoYrevenue growth for Azureonaconstant currency basis.Capex(incl. financeleases)came in at US$34.9bn for1QFY26, up75% YoY, among whichroughly half of the spend was still on short-lived assets (such as GPUs andCPUs) tofulfil demand. Management now expects growth of Capex inFY26E to be higher than FY25 (58% YoY), which indicates a minimumspend of c. US$140bn in FY26 (vs our previous forecast of US$120bn). Source: FactSet ARPU expansion trendcontinuedin PBP business.Productivity andBusiness Processes (PBP)revenue was US$33.0bn in1Q, up16.6% YoY(1QFY25:12.3%; 4QFY25: 15.7%), and accounted for43% of total revenue.M365commercial/consumer cloud revenue increased by 17/26%YoY(4QFY25:18/20%),aided by6/7% YoY growth in paid M365 commercialseats/subscribersand ARPU expansion. Microsoft’s family of Copilot appshas surpassed 150mn MAUsacross commercial and consumer in1QFY26,and the ARPU expansiontrendcould sustain in FY26, in ourview. OPM expansion better than consensus expectation.Although GPMcame down0.4ppt YoY to 69.0% in 1QFY26 due to the incrementalinfrastructureinvestment to support the growth of AI related business,overall OPM came in at48.9%, up 2.3ppts YoY and was better thanconsensus at 46.5%, driven by 3.5/3.4ppts margin expansion in PBP/morepersonal computing (MPC) segment aided by operating efficiency gains,although this was partly offset by 0.3ppts YoY decline in OPM of IC to 43.3%(consensus: 42.4%). Source: FactSet Source: Company data,CMBIGMNote: cc: constant currency Source: Company data,CMBIGMestimates Changes in forecast and valuation Risks 1.Slower-than-expected margin expansion;2.Slower-than-expected ramp-up in revenue contribution from AI related service. Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsible for the content of this research report, in whole or in part, certifies thatwith respect to the securities or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2)no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities andFutures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to thedate of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3) serve as an officer of any of the HongKong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies coveredin