Microsoft (NASDAQ:MSFT) is slated to report fiscal second-quarter results after the close of trading and investment firm Wedbush Securities believes that Azure growth has been “more stable” than fears suggest.

Analyst Dan Ives, who has an outperform rating on Microsoft (MSFT), noted that recent conversations with customers and partners underpin confidence that CEO Satya Nadella and his team can ride out the economic storm and be in a stronger position once the downturn ends.

“While Azure growth has clearly decelerated in the field we believe MSFT should be able to exceed its 37% Azure growth target (constant currency) in the December quarter when Redmond reports earnings after the bell,” Ives wrote in a note to clients.

Ives also noted the belief that 90% of Azure and Office 365 large deal activity is “still on track” going into the next two quarters, albeit with some “modest push-outs and downsizing” of major cloud projects.

“We acknowledge that some larger cloud deals from the financial vertical could start to get downsized as data center projects gets curtailed in this more scrutinized IT budget backdrop,” Ives added.

“However, federal deals are seeing the opposite impact as [Microsoft] as well as cloud brethren Amazon, Google, Oracle, and IBM are seeing a surge of Beltway cloud deal activity heading into 2023 with a major shift to cloud underway from the Pentagon to civil agencies in the 202 area code.”

A consensus of analysts estimate that Microsoft (MSFT) will earn $2.31 per share on $53.16B in revenue this quarter.

On Monday, Microsoft (MSFT) confirmed a “multiyear, multibillion dollar” investment in ChatGPT maker OpenAI.