Small-Cap Stocks Thrive: Here's to Continued Success.
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Dec 18 2025
0mins
Should l Buy MSFT?
Source: Barron's
Small-Cap Performance: Small-cap stocks are currently outperforming larger stocks in the market.
Potential for Growth: Various factors are expected to contribute to further increases in small-cap stock prices.
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Analyst Views on MSFT
Wall Street analysts forecast MSFT stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for MSFT is 631.36 USD with a low forecast of 500.00 USD and a high forecast of 678.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
34 Analyst Rating
32 Buy
2 Hold
0 Sell
Strong Buy
Current: 404.370
Low
500.00
Averages
631.36
High
678.00
Current: 404.370
Low
500.00
Averages
631.36
High
678.00
About MSFT
Microsoft Corporation is a technology company that develops and supports software, services, devices, and solutions. Its Productivity and Business Processes segment consists of products and services in its portfolio of productivity, communication, and information services, spanning a variety of devices and platforms. It comprises Microsoft 365 Commercial products and cloud services; Microsoft 365 Consumer products and cloud services; LinkedIn, and Dynamics products and cloud services. The Intelligent Cloud segment consists of its public, private, and hybrid server products and cloud services. It comprises server products and cloud services, including Azure, and enterprise and partner services, including Enterprise Support Services. Its More Personal Computing segment primarily comprises Windows and Devices, including Windows OEM licensing; Gaming, including Xbox hardware and Xbox content; Search and news advertising, comprising Bing and Copilot, Microsoft News, and Microsoft Edge.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Customer Concentration Risk: The company's remaining performance obligations reached $625 billion, up 110% year-over-year, with OpenAI contributing approximately $250 billion; management noted that even without OpenAI's commitments, the business outlook remains positive, though customer concentration risk is significant.
- Strong Software Performance: Despite market fears that AI may displace enterprise software, Microsoft's Productivity and Business Processes segment grew by 14% year-over-year on a constant-currency basis, demonstrating the resilience of its high-margin software business.
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- Stable Cloud Growth: The Azure cloud computing segment achieved a 39% growth rate, and although investors anticipated higher revenue growth, management indicated that demand continues to outstrip supply, reflecting strong market demand and potential profitability.
- Significant Increase in Performance Obligations: Microsoft's remaining performance obligations rose to $625 billion, a 110% year-over-year increase, with approximately $250 billion stemming from a new deal with OpenAI, presenting substantial growth opportunities despite notable customer concentration risk.
- Strong Software Business Performance: Despite market concerns about AI displacing enterprise software, Microsoft's Productivity and Business Processes segment grew 14% year-over-year, and the combination of high-margin software and increasing cloud billings provides robust cash flow to fund AI data center projects.
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- Cisco Profit Warning: Cisco Systems forecasted that rising memory chip prices would erode profitability, leading to a more than 10% drop in its stock price, which may prompt investors to revise down their future performance expectations, negatively impacting overall market sentiment.
- Employment Data Impact: Initial US jobless claims fell by 5,000 to 227,000, reflecting a slightly weaker labor market, which could influence the Federal Reserve's monetary policy decisions and lower market expectations for future rate cuts.
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- Future Growth Expectations: TSMC anticipates nearly 30% revenue growth in 2026, with a projected CAGR approaching 25% from 2024 to 2029, reflecting its long-term growth potential in the AI market.
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See More
Microsoft Shares Drop Amid AI Spending Concerns
- Rising Capital Expenditures: Microsoft reported capital expenditures of $37.5 billion last quarter, exceeding analyst expectations, and while its Azure cloud segment grew by 39%, investors anticipated higher revenue growth, leading to a stock price decline.
- Customer Concentration Risk: The company's remaining performance obligations reached $625 billion, up 110% year-over-year, with OpenAI contributing approximately $250 billion; management noted that even without OpenAI's commitments, the business outlook remains positive, though customer concentration risk is significant.
- Strong Software Performance: Despite market fears that AI may displace enterprise software, Microsoft's Productivity and Business Processes segment grew by 14% year-over-year on a constant-currency basis, demonstrating the resilience of its high-margin software business.
- Stable Free Cash Flow: Even with increased capital expenditures, Microsoft maintained a free cash flow of $5.9 billion, providing ample funding for its AI data center projects, supported by its high-margin software business and growing cloud billings.
See More
Microsoft's AI Investment Opportunity Emerges
- Surge in Capital Expenditures: Microsoft reported $37.5 billion in capital expenditures last quarter, exceeding analyst expectations, which, while pressuring profit margins, underscores the company's commitment to AI data center investments that are expected to drive future growth.
- Stable Cloud Growth: The Azure cloud computing segment achieved a 39% growth rate, and although investors anticipated higher revenue growth, management indicated that demand continues to outstrip supply, reflecting strong market demand and potential profitability.
- Significant Increase in Performance Obligations: Microsoft's remaining performance obligations rose to $625 billion, a 110% year-over-year increase, with approximately $250 billion stemming from a new deal with OpenAI, presenting substantial growth opportunities despite notable customer concentration risk.
- Strong Software Business Performance: Despite market concerns about AI displacing enterprise software, Microsoft's Productivity and Business Processes segment grew 14% year-over-year, and the combination of high-margin software and increasing cloud billings provides robust cash flow to fund AI data center projects.
See More
US Stock Market Volatility as Tech Stocks Weigh Down Indices
- Tech Stock Pressure: The S&P 500 index fell by 0.52% and the Nasdaq 100 index dropped by 1.08% due to weakness in the Magnificent Seven tech stocks, indicating investor concerns that could dampen market confidence.
- Cisco Profit Warning: Cisco Systems forecasted that rising memory chip prices would erode profitability, leading to a more than 10% drop in its stock price, which may prompt investors to revise down their future performance expectations, negatively impacting overall market sentiment.
- Employment Data Impact: Initial US jobless claims fell by 5,000 to 227,000, reflecting a slightly weaker labor market, which could influence the Federal Reserve's monetary policy decisions and lower market expectations for future rate cuts.
- Chip Demand Recovery: Sandisk's stock rose over 7% following Kioxia's forecast of strong demand for NAND memory chips, indicating growth potential in the AI infrastructure sector, which may create new investment opportunities for related companies.
See More
Analysis of Smart Money Flows
- Concentration of Money Flows: Most portfolios are now heavily concentrated in the 'Magnificent Seven' stocks, indicating a high dependency on these companies, which could lead to concentrated investment risks.
- Apple's Outflow: In early trading, Apple Inc (AAPL) experienced negative money flows, suggesting a decline in investor confidence that may impact its short-term stock performance.
- Divergent ETF Performance: Both SPDR S&P 500 ETF Trust (SPY) and Nasdaq 100 ETF (QQQ) saw positive money flows in early trading, reflecting market optimism towards these indices, potentially driving related stocks higher.
- Investment Strategy Advice: Investors are advised to continue holding quality long-term positions while adding tactical investments based on market signals, and to stay within the Arora Protection Band to participate in upside while protecting against downside risks.
See More
TSMC: A Hidden AI Stock Giant
- Significant Revenue Growth: In 2025, TSMC's revenue increased by 36% in USD terms, with high-performance computing (HPC) revenue surging 48% and accounting for 58% of total revenue, highlighting its strong demand and market dominance in the AI chip sector.
- Improved Profitability: TSMC achieved a gross margin of 60% in 2025, expected to remain above 56% in the coming years, indicating robust pricing power and profitability amid soaring AI chip demand.
- Future Growth Expectations: TSMC anticipates nearly 30% revenue growth in 2026, with a projected CAGR approaching 25% from 2024 to 2029, reflecting its long-term growth potential in the AI market.
- Strategic Expansion Plans: TSMC plans to ramp up production of its 2nm chips in the second half of 2026 while expanding overseas plants in Japan, the U.S., and Europe to mitigate risks from potential Taiwan-China tensions, ensuring its competitive edge and supply chain security.
See More
Investment Opportunities in the AI Boom
- Tesla Delivery Decline: Tesla's 2025 deliveries of approximately 1.6 million fell 9% year-over-year, impacted by high interest rates and a lack of clear catalysts, resulting in a 3% decline in full-year revenue and a 47% drop in earnings per share.
- Energy Business Growth: Despite challenges, Tesla's energy storage business saw a 49% year-over-year increase in 2025, totaling 46.7 gigawatt-hours, which spurred a 27% revenue growth in its energy generation and storage segment to about $12.8 billion, highlighting its potential in renewable energy.
- Nvidia's Strong Financials: Nvidia reported third-quarter fiscal revenue of $62 billion, a 62% year-over-year increase, with net income rising 65%, as CEO noted accelerating compute demand and sold-out cloud GPUs, underscoring its robust market position in AI.
- Share Buyback Program: Nvidia repurchased approximately $37 billion worth of shares in the nine-month period ending October 26, 2025, indicating its financial health and ability to reward shareholders while leading in AI infrastructure development.
See More
