Microsoft Stock Outlook: Why MSFT Is a Must-Own for Growth Investors


  • Microsoft (MSFT) is the most valuable stock in the market, with a multiple that prices in significant future growth.
  • The company’s AI focus has been paramount for its recent success, with a number of partnerships highlighting its success.
  • Here’s why now may in fact be a decent time to consider adding Microsoft at current levels. 
MSFT stock - Microsoft Stock Outlook: Why MSFT Is a Must-Own for Growth Investors

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If you’re looking for a hypergrowth tech stock to invest in during this point in the market cycle, I’ve long argued Microsoft (NASDAQ:MSFT) is a company that’s worth investing in.

There are many reasons for this. The company’s consistent upside driven by fundamental growth in the company’s cloud services and operating systems segments continues to provide the sort of growth stability investors want to see.

Microsoft continues to be among the leading innovators in the AI space, given its early investment in OpenAI, leading to recent AI integrations with the company’s Surface laptops and other products, which many are viewing as clearly bullish for the company over the long-term.

Over the past quarter, Microsoft has seen strong growth, driven by improving demand in its productivity, cloud and personal computing segments. Revenue is relatively evenly spread across these segments, meaning Microsoft’s 17% revenue growth overall is an impressive figure, particularly given Microsoft’s size.

As the company continues to see its valuation swell, the question is whether MSFT stock is worth buying near 37-times earnings. Here’s why I think the answer is yes.

Deal with Hitachi

Microsoft’s recent multibillion-dollar partnership that was announced with Hitachi Ltd. is one I think is investors should consider.

The deal aims to boost social innovation with generative AI. As a result of this deal, Hitachi aims to advance the growth it’s seen in the company’s Lumada business, targeting revenue of 2.65 trillion yen ($18.9 billion) for the full year. 

Hitachi partnered with Microsoft’s generative AI Center to streamline operational efficiency and application development within the Hitachi Group.

Using Copilot for Microsoft 365 and GitHub Copilot, Hitachi is among the companies integrating Azure OpenAI Service for enhanced customer service and system development. 

Additionally, Hitachi Rail employed GenAI for predictive maintenance, optimizing equipment monitoring and forecast accuracy, leading to improved service quality and reduced operating costs.

Hitachi and Microsoft have also collaborated to bolster digital solutions for energy transition, focusing on asset performance management and risk reduction.

This partnership is focused on optimizing the company’s energy network, ensuring reliable and sustainable energy delivery. Increased computing power and cloud infrastructure were pivotal for scaling these solutions.

AI is Key

There’s no denying that artificial intelligence has been the key driver that’s taken MSFT stock on the ride it’s been on.

The cloud and software giant has forged several key partnerships and made multiple infrastructure investments to expand AI offerings across various markets. Deals with Insight and ServiceNow (NYSE:NOW) may signal strategic collaborations for cloud and AI solutions. ServiceNow likely to promote Microsoft’s Copilot to its clientele.

Microsoft has also broadened LinkedIn’s subscription options beyond just recruiters to include sales professionals and skill improvement for employees. Leveraging ChatGPT and AI, Microsoft may introduce diverse AI subscription services like data mining for companies and expert-level answers for users.

The company steadily boosted revenue from its major businesses by expanding Microsoft 365 sales to emerging markets and front line workers.

This strategy paid off, evident in a 15% surge in Office 365 Commercial revenue year-over-year. The trend is likely to persist with Microsoft’s ongoing strategic execution.

MSFT Stock Remains a Must-Own

With a robust presence across key high-growth industries, Microsoft’s expanding cloud platform drives revenue. In the latest quarter, cloud revenue soared by 23%, totaling $35.1 billion, contributing to the $61.9 billion total revenue.

In recent months, Microsoft secured a larger share of internet search, while LinkedIn revenue surged by 9% year-over-year in Q2 of 2023.

Integration of AI in LinkedIn, and the various other partnerships the company is pursuing, may fuel its growth in the medium-to-long term. I think there remains plenty of upside potential for MSFT stock over the long-term, despite its relatively rich valuation right now.

On the date of publication, Chris MacDonald 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 Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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