Shares of Microsoft (NASDAQ:MSFT) have remained mostly flat over the past five trading sessions, doing little to deter the stock’s strong performance over the past month that has resulted in a gain of 20.34%. Year-to-date, the tech behemoth is now up 7.60% while continuing to reward investors with a dividend that currently yields 0.74%. While that may not seem like much in an era with income-focused, high-yield ETFs, MSFT provides investors with Magnificent Seven growth exposure while also featuring a dividend that — at its current share price — equates to 83 cents per share per quarter.
Microsoft is a leader in cloud computing and artificial intelligence. It is capitalizing on its Azure platform’s momentum as revenue jumped 33%, driven by AI services, though offset by tariff concerns following a U.S.-China trade pause on May 11 that momentarily reduced tariffs from 145% to 30%.
When the company reporting FY25 Q3 earnings, it announced that total revenue rose 13% to $70.1 billion and it generated earnings of $3.46 per share, beating estimates of $3.22 per share. Despite a $800 million charge last quarter from its investment in General Motors‘ (NYSE:GM) Cruise robotaxi initiative that the automaker subsequently shutdown, Microsoft’s focus on AI and cloud resilience continues to fuel optimism.
However, its decision last week to fire 6,000 employees, or 3% of its workforce, signals the tech giant is serious about cost discipline amid economic uncertainty. With analysts eyeing sustained cloud demand, 24/7 Wall St. conducted analysis to explore whether Microsoft can maintain its upward trajectory and drive long-term growth.
Key Points in This Article:
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Microsoft is dedicating significant capex to AI and cloud infrastructure in order to compete with other tech firms.
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Microsoft’s gaming segment grew 44% last year, providing significant revenue to complement its software, cloud and AI business lines.
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Why Invest in Microsoft
Microsoft navigates challenges, but remains a prime investment due to its AI and cloud dominance. Third-quarter earnings showcased robust demand for its Intelligent Cloud segment, though tariff risks linger. Microsoft’s $80 billion cash reserve fuels its $80 billion investments in cloud and AI infrastructure, with over half in the U.S.
Its Microsoft 365 Copilot, adopted by over 70% of Fortune 500 firms, drives productivity revenue, positioning Microsoft to capture the AI market’s 37% compounded annual growth predicted through 2030. Similarly, partnerships with Oracle (NYSE:ORCL) for multi-cloud solutions bolster its competitiveness against Amazon‘s (NASDAQ:AMZN) AWS.
When Microsoft last reported earnings, EPS beat by 7.40% and revenue beat by 2.37%. The EPS beat marked the 15th time in the past 16 quarters that the company surpassed estimates, with EPS coming in at $3.46 versus the consensus forecast of $3.20.
Microsoft (MSFT) As a Company
Microsoft reported a gross profit of $49.8 billion, up 14% year-over-year, with gross margins at 68%, driven by strong cloud and AI demand. The company committed to continuing spending on capital expenditures, focusing on AI data center expansion to meet enterprise needs. Analysts expect Q4 capex to remain elevated at $16 billion to $17 billion to support Microsoft’s cloud infrastructure growth.
Tariff uncertainties do pose risks, even with the pause on China, as supply chain cost pressures for server hardware are not eliminated. Microsoft’s operating income of $32 billion was tempered by a 5% rise in operating expenses, reflecting heavy AI R&D investments. Despite no revenue from its $13 billion OpenAI stake, Microsoft reported $42.4 billion in Microsoft Cloud revenue, up 20% year-over-year.
Beyond cloud, Microsoft’s gaming segment grew 44% with 43 points of the gain coming from its acquisition of Activision, but bolstered by Xbox content and Bethesda’s Starfield expansion. A partnership with Oracle for multicloud solutions strengthens its enterprise offerings, further diversifying its revenue. Wall Street projects Q4 revenue of $73.8 billion, up 14%, driven by Microsoft’s AI and cloud momentum.
Microsoft As a Stock
Microsoft stock has gained just 5.41% over the past year, but since hitting its year-to-date low on April 8, the stock is up nearly 27%. Analyst sentiment remains bullish, with 30 of 35 analysts covering MSFT assigning it a “Buy” rating, five assigning it a “Hold” rating and zero assigning it a “Sell” rating. Overall, the stock receives a consensus “Strong Buy” rating.
Wall Street’s price targets cover a significant range, spanning $475 per share on the low end to $600 per share on the high end. The median price target of $510 per share, ranging from $475 to $600. On May 15, Citigroup raised its price target to $540, reiterating its “Buy” rating, though Piper Sandler maintained a neutral position. Even at the low end of analysts’ estimates, there is forecasted growth from current prices.
Institutional ownership currently stands at 73.05%, with three of the four largest buy-side firms — Vanguard, BlackRock and State Street — holding a collective 1.570 billion shares of Microsoft.
|
Estimate |
Price Target |
%Change From Current Price |
|
Low |
$475 |
5.28% |
|
Median |
$512.34 |
13.56% |
|
High |
$600 |
32.99% |
Microsoft (MSFT) Stock Prediction in 2025
Microsoft’s 33% Azure growth and 20% cloud revenue increase in Q3 position it for AI market gains. However, $20 billion quarterly capex and tariff risks require caution. Its $80 billion cash reserve and Oracle partnership offer stability, making MSFT stock a buy for growth investors, even as valuation concerns linger.
24/7 Wall St.’s 12-month price target for Microsoft is $495.00, implying 9.71% upside potential from the stock’s current price. This cautious target reflects Azure’s strength and Q4 revenue guidance of $73.7 billion, balanced against the need for higher capex spending and potential supply chain disruptions, positioning it at a realistic estimate of its leading presence in the space.
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