Microsoft (NASDAQ:MSFT) is powering up for accelerated growth in the 2024 fiscal year. The company is beginning to integrate AI across its entire technology stack, which is set to drive momentum in the cloud. This is central to my MSFT stock analysis.
Their core business remains strong, and AI will be the extra juice that will power the company’s long-term growth. Most notably, Microsoft’s AI-powered copilot software will boost productivity for its customers. This will be a huge revenue growth driver which could potentially add hundreds of billions in market cap to the company.
Despite still being richly valued in comparison to its peers, Microsoft’s premium valuation is likely justified.
Generative AI to Drive Azure Cloud Growth
Generative AI has been the talk on the street lately, and the long-term market opportunities will be a huge benefit to cloud providers. During Microsoft’s Ignite event back in November 2023, Nvidia’s Founder and CEO, Jensen Huang said that generative AI is ‘’the single most significant platform transition in computing history.’’
This is only the beginning and experts suggest generative AI to be significantly bigger than PC and the internet. Microsoft continues to win new customers and AI is fuelling Azure cloud growth. Azure’s cloud infrastructure will be a key offering for businesses to build, train, and scale advanced foundational models.
In their latest quarterly financial results, revenue in the intelligent cloud increased 20% YOY to $25.9 billion. Server products and cloud services revenue grew 22%, driven by Azure and other cloud services revenue growth of 30%. Their core business including revenue in productivity and business processes saw strong double-digit growth. With the infusion of AI across their entire technology stack in 2024, the future remains extremely bright.
Microsoft’s AI-Powered Copilot Software
Microsoft copilot isn’t just a fancy name for a spellchecker. This AI-powered tool lives up to its name, acting as a personal assistant within the Microsoft 365 suite. Think of it as a productivity genie, enhancing your creativity, efficiency, and skillset across popular apps like Word, Excel, Outlook, and PowerPoint.
Large language models (LLMs) are what power customers’ data into Microsoft Graph, which can turn words into a seamless productivity tool. Some of its key features include the ability to suggest greetings, summarize important threads, and even draft emails and responses. Furthermore, their new business chat features leveraging natural language processing (NLP) can generate status updates across their entire Microsoft suite.
Copilot is not just a productivity tool to complete tasks, it is also a learning tool. Customers look forward to the new features that are set to be released in 2024. This is truly in the beginning, and the long-term revenue growth opportunities are likely greater than what investors may think.
MSFT Stock Analysis: Growth May Justify its Premium Valuation
There is a strong likelihood that you may be questioning buying MSFT shares near all-time highs. Especially when considering you could have paid way less for the company just one year ago.
However, that may be a poor way to value the company when looking at the actual numbers. As previously noted, Microsoft is set to reign on Apple’s (NASDAQ:AAPL) parade and takeover as the leading technology giant.
Microsoft is still managing to clock strong double-digit growth, even despite becoming the world’s most valuable company. Their recent Q2 FY24 results have showcased a sliver of their true potential, as Azure cloud deployments have only just begun.
The market opportunities in generative AI are truly groundbreaking, and Microsoft is leading from the front. While shares are currently trading a significant premium, cloud strength will continue to drive revenue growth and operating income in FY24. That concludes my MSFT Stock analysis.
On the date of publication, Terel Miles did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
