Microsoft's Strong Growth in AI Business
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Mar 16 2026
0mins
Should l Buy MSFT?
Source: Fool
- Cloud Growth: Microsoft's Azure cloud platform achieved a 39% revenue increase in Q2, with its Foundry platform seeing an 80% rise in customer spending, reflecting strong demand for AI services, although limited compute capacity constrained even higher growth potential.
- Capital Expenditure Plans: Microsoft spent $37.5 billion on capital expenditures last quarter, primarily for building data centers and server setups; while a slight drop in spending is expected this quarter, management remains confident in future plans, supported by a $625 billion backlog of remaining performance obligations.
- Software Business Performance: Microsoft 365 commercial revenue rose 17%, and Dynamics 365 increased by 19%, with Copilot software reaching 15 million users, indicating significant revenue growth potential for AI-driven product suites, especially with a market of over 400 million users.
- Attractive Stock Valuation: With Microsoft shares trading around $400 and a forward P/E ratio of 24, considering its competitive positioning in cloud computing and enterprise software, the company is set for double-digit revenue and earnings growth, making the current price a “no-brainer buy” for investors.
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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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- Rising Oil Prices Impact: The U.S. WTI crude price surged nearly 12% over four days, exacerbating inflationary pressures and further limiting the market's upward potential, especially against the backdrop of ongoing Middle Eastern conflicts that heighten sensitivity to oil prices.
- Interest Rate Uncertainty: The market's uncertainty regarding future interest rate movements encourages investors to remain on the sidelines, particularly as inflation expectations rise, making capital appreciation difficult in the short term and increasing market risks.
- Liquidity Crisis: With the increase in new stock issuances, the market faces a risk of cash crunch, especially when these new stocks are added to the S&P 500, necessitating the sale of existing assets to raise funds, which further destabilizes the market.
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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See More
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See More
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- Earnings Expectations Rise: Despite concerns over a slowdown in AI investments, analysts have generally raised earnings estimates for major tech companies, with Nvidia trading at a forward P/E of 21.4, reflecting strong growth potential in earnings and revenue.
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- Microsoft Price Drop: Microsoft is down over 30% from its all-time high, with a current market cap of $2.8 trillion, indicating that the market may be undervaluing its future AI potential, presenting a significant buying opportunity for investors.
- Meta's Spending Plans: Meta expects capital expenditures of $115 billion to $135 billion this year; despite market skepticism, its Q4 revenue rose 24% year-over-year, showcasing strong ad platform performance, and with a current P/E ratio of just 19, it appears attractive.
- Broadcom's AI Chip Business: Broadcom's custom AI chip division generated $8.4 billion in sales in Q1, with an annualized run rate of about $34 billion, and the CEO anticipates $100 billion in revenue from this segment by the end of 2027, making it a compelling investment despite a 25% stock drop.
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See More
