Microsoft's Cloud Business Shows Strong Growth
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Mar 26 2026
0mins
Should l Buy MSFT?
Source: Fool
- Cloud Business Growth: As of December's fiscal second quarter, Microsoft's cloud division's remaining performance obligations reached $625 billion, more than doubling year-over-year, indicating strong market demand and future revenue potential.
- Clear Revenue Expectations: Microsoft expects to recognize approximately 25% of its remaining performance obligation revenue over the next 12 months, reflecting confidence in future income and the ongoing growth of its cloud services.
- Strong Competitor Performance: Oracle's remaining performance obligations reached $553 billion in February, with projections of $144 billion in cloud infrastructure business by 2030, further validating the robust growth potential of the AI market.
- Sustained Market Demand: Although AI demand may cool, industry researcher Technavio anticipates the global AI infrastructure market will still grow at an average annual rate of nearly 25%, highlighting long-term market opportunities and investment value.
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Analyst Views on MSFT
Wall Street analysts forecast MSFT stock price to rise
34 Analyst Rating
32 Buy
2 Hold
0 Sell
Strong Buy
Current: 369.370
Low
500.00
Averages
631.36
High
678.00
Current: 369.370
Low
500.00
Averages
631.36
High
678.00
About MSFT
Microsoft Corporation is a technology company. The Company develops and supports software, services, devices, and solutions. The Company’s segments include Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. The Productivity and Business Processes segment consists of products and services in its portfolio of productivity, communication, and information services. This segment primarily comprises: Office Commercial, Office Consumer, LinkedIn, and Dynamics business solutions. The Intelligent Cloud segment consists of server products and cloud services, including Azure and other cloud services, SQL Server, Windows Server, Visual Studio, System Center, and related Client Access Licenses (CALs), and Nuance and GitHub; and Enterprise Services, including enterprise support services, industry solutions and Nuance professional services. The More Personal Computing segment primarily comprises Windows, Devices, Gaming, and search and news advertising.
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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- Valuation Metrics Near Lows: Both the price-to-earnings ratio and operating earnings ratio indicate that Microsoft's valuation is approaching decade lows, suggesting that the current stock price may be undervalued, making it an attractive buying opportunity for investors.
- Future Earnings Expectations: Microsoft is expected to report its next quarterly earnings in April, with market sentiment suggesting this could act as a catalyst for stock price appreciation, especially given the company's ongoing investments in AI and cloud computing.
See More
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- Shift to Multi-Model Strategy: Recognizing the ineffectiveness of Copilot's reliance on OpenAI models, Microsoft has pivoted to a multi-model agentic approach, introducing new features like Council and Critique aimed at enhancing user experience and strengthening Copilot's competitiveness in the enterprise AI tool market.
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- Market Confidence Eroded: Although Microsoft's profitability is expected to continue rising, the market remains skeptical about its future performance, perceiving the company as no longer the world-class entity it once was, leading investors to potentially regret not buying shares at these low prices.
See More
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- Market Reaction Analysis: The video published on April 4, 2026, highlights investor interest in both companies, particularly in the current economic climate where investors are inclined to favor companies with stronger growth potential.
- Investor Decision Factors: When selecting investment targets, investors must consider factors such as financial health, market share, and future growth potential, as these will directly impact investment returns.
- Future Outlook: Although both companies exhibit solid market performance, investors should closely monitor their financial reports and market dynamics to make informed investment decisions.
See More
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- Nvidia Investment Opportunity: Nvidia was recommended on April 15, 2005, and a $1,000 investment at that time would now be worth $1,087,496, indicating its market leadership and ongoing investment appeal.
- Market Performance Analysis: Stock Advisor's total average return of 926% significantly outperforms the S&P 500's 185%, reflecting the effectiveness of its stock selection strategy and market outperformance.
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See More
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- Strategic Shift: Microsoft is transitioning Copilot to a multi-model agentic product, introducing new features like Council and Critique aimed at enhancing user experience and increasing market appeal, which could improve its performance among enterprise users.
- Stock Price Volatility: Microsoft shares currently trade at 23 times its trailing 12-month earnings, about 30% below its 10-year average, reflecting market concerns over future growth; however, analysts project a long-term annual growth rate of 13% to 14%, suggesting potential value for investors.
- Dependency on OpenAI Risks: With approximately 45% of its commercial bookings tied to OpenAI, Microsoft faces significant risks; however, the market has substantially lowered its valuation, potentially offering a buying opportunity for investors, especially as the company continues to see earnings growth.
See More
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- Optimistic Guidance: Management anticipates a 9% sequential revenue increase in the first quarter, projecting adjusted EPS of $0.79, indicating sustained growth potential in AI infrastructure, particularly within the data center segment.
- Collaboration with Nvidia: Nvidia's announcement of a $2 billion investment in Marvell, coupled with a product partnership, is expected to enhance Marvell's market position in AI infrastructure, particularly in the application of photonic networking technologies.
- Diversified Customer Base: Marvell has added Microsoft as a client, with Microsoft's Maia2 chip likely to drive further business growth in AI chips, demonstrating the company's adaptability and strategic positioning in a competitive market.
See More
