Key Factors
Microsoft’s cloud enterprise is well-positioned to proceed rising within the subsequent few years.
The tech big is a vital infrastructure supplier supporting the AI ecosystem.
The corporate additionally boasts robust monetary efficiency and a sturdy order backlog.
- 10 shares we like higher than Microsoft ›
Investing in firms with resilient enterprise fashions and excessive development potential has typically proved to be very profitable for long-term retail traders. Whereas discovering such gems generally is a time-consuming activity, one is hiding in plain sight.
Microsoft (NASDAQ: MSFT) is one expertise participant that mixes a well-established market dominance within the rising enterprise software program area with publicity to rising development areas corresponding to synthetic intelligence (AI) and quantum computing.
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Here is why Microsoft generally is a sensible long-term choose in 2025.
Picture supply: Getty Photos.
Profitable AI technique
Microsoft’s AI technique has positioned the corporate to learn no matter growing competitors and technological breakthroughs within the AI software area. As an alternative of specializing in constructing AI purposes or fashions, the corporate has constructed the important AI infrastructure required to help the whole ecosystem.
This turns into clear if you research how OpenAI’s ChatGPT works. Each person interplay on ChatGPT requires Microsoft’s Cosmos DB (a globally distributed NoSQL database service) to retailer chat histories, person profiles, and conversational states. The corporate’s Azure PostgreSQL (cloud database service) manages important metadata of the ChatGPT interplay.
Microsoft lately launched the Azure AI Foundry service to assist purchasers design, customise, handle, and scale AI purposes and brokers. The service additionally permits purchasers to make use of a spread of AI fashions finest suited to their efficiency necessities, funds, and use case necessities. Azure AI Foundry service is already being utilized by practically 80% of Fortune 500 purchasers.
Sturdy monetary efficiency
Microsoft’s latest monetary outcomes show distinctive efficiency throughout all enterprise segments. The corporate reported income of over $281 billion in fiscal 2025 (ended June 30), up 15% 12 months over 12 months, whereas working revenue expanded 17% 12 months over 12 months to achieve $128 billion.
Microsoft has demonstrated power throughout all its enterprise areas. The productiveness and enterprise processes phase, constructed round Microsoft 365 industrial and client merchandise provided as cloud providers, generated $120.8 billion in income and $69.8 billion in working revenue.
In the meantime, the clever cloud phase, powered by Azure, achieved $106.3 billion in annual income and $44.6 billion in working revenue. The extra private computing phase generated $54.6 billion in income and $14.1 billion in working revenue.
Microsoft additionally boasts of remarkable future income visibility due to the $368 billion in contracted backlog.
Aggressive benefits
Microsoft has created a powerful aggressive moat throughout a number of interconnected enterprise areas.
The Azure cloud computing platform generated $75 billion in income in fiscal 2025, up 34% 12 months over 12 months. The corporate’s Azure infrastructure now spans over 400 knowledge facilities throughout 70 areas — greater than the variety of knowledge facilities operated by some other cloud supplier. The corporate additionally added over 2 gigawatts of latest knowledge heart capability in fiscal 2025. Microsoft has additionally optimized these knowledge facilities to run AI workloads effectively.
Microsoft has additionally constructed a sturdy software program ecosystem atop the Azure infrastructure, which can also be seeing robust traction. The corporate’s Microsoft Material knowledge platform noticed income soar 55% 12 months over 12 months in fiscal 2025. As enterprises more and more combine these providers into their core operations, it turns into troublesome for them to modify to the competitors.
Enterprise adoption of Microsoft 365 Copilot can also be accelerating at a dramatic tempo. Microsoft has added extra Copilot seats throughout the fourth quarter since launching the service, as even current prospects are quickly growing utilization.
Massive addressable market
Goldman Sachs expects cloud computing gross sales globally to develop from $496 billion in 2023 to $2 trillion by 2030. At present accounting for a 20% share of the worldwide cloud spending, Microsoft is the second-leading cloud participant and is well-positioned to seize a big share on this quickly rising market.
Microsoft is investing closely to seize these development alternatives. The corporate plans to speculate practically $100 billion in capital expenditures in fiscal 2026.
Cheap valuation
Regardless of the various execs, Microsoft stays at cheap valuations in comparison with lots of its expertise friends. The inventory is buying and selling at simply over 38 occasions earnings and about 14 occasions gross sales. However, enterprise software program friends corresponding to Oracle and ServiceNow commerce at 58 occasions earnings and 108 occasions earnings, respectively.
Microsoft additionally boasts a stellar stability sheet with $94.5 billion in money on the finish of fiscal 2025. The corporate generated $42.6 billion in working money stream and free money stream of $25.6 billion throughout the newest quarter. This monetary basis has enabled the corporate’s aggressive capex technique, whereas returning practically $37 billion to shareholders as dividends and buybacks.
Contemplating these components, Microsoft stands out as a stellar long-term choose for traders.
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Manali Pradhan has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Goldman Sachs Group, Microsoft, Oracle, and ServiceNow. The Motley Idiot recommends the next choices: lengthy January 2026 $395 calls on Microsoft and brief January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure coverage.
