The past year saw Microsoft (NASDAQ: MSFT) soar, outpacing the S&P 500 with a remarkable 63% increase in stock value. Fueling this surge were standout quarterly performances and the infusion of artificial intelligence (AI) driving business momentum.
For investors eyeing Microsoft stock anew, are the glimmering gains already baked into the cake?
Surging Growth Trajectory for Microsoft
Microsoft’s fiscal 2024 first-half revenue surged by 15% to $118.5 billion, and adjusted earnings spiked by 30% to $5.92 per share. The pace set in this fiscal year suggests heightened growth compared to the 7% revenue uptick to $212 billion in fiscal 2023, with non-GAAP earnings also moving up to $9.81 per share.
Projections for the third quarter of fiscal 2024 landing between $60 billion and $61 billion forecast a 14% year-on-year revenue hike, hinting at a sustained accelerated growth trajectory for the tech behemoth.
Analysts anticipate Microsoft wrapping up the fiscal year at a 15% revenue leap to $244 billion and a 19% earnings uptick to $11.66 per share, underscoring the company’s brisk growth pace.
AI-Driven Growth and Beyond
AI adoption is proving a game-changer for Microsoft’s key offerings. The Azure cloud arm, for instance, is gaining market share on the back of various AI tools Microsoft integrates into the platform.
Notably, Azure’s revenue soared by 30% year-on-year, surpassing Amazon Web Services and Alphabet’s Google Cloud in growth. With AI services contributing a six-point boost to the cloud business, Microsoft’s buoyant position in the evolving cloud landscape is evident.
The global cloud computing market’s projected upswing to $2.4 trillion in 2030 from $569 billion in 2022 forebodes a hopeful outlook for Microsoft, given its strengthening market presence.
Pursuing Growth in Productivity Space
With the integration of AI tools into its productivity suite, Microsoft is future-proofing its ecosystem for a dynamic marketplace. The Copilot generative AI, now available in popular Microsoft applications like Word and Excel, is empowering users and businesses with a productivity edge.
Forecasting a 25% annual rise in demand for cloud-based office tools through 2030, translating to a $128 billion annual revenue forecast, Microsoft’s strategic AI alignment in the productivity domain signals a savvy move to capture market opportunities.
Potential for Robust Stock Growth
Backed by these growth drivers, upbeat projections paint a rosy picture for Microsoft’s earnings per share (EPS). Forecasts swelling to $15.65 per share by fiscal 2026 coupled with a current 35x forward earnings multiple imply untapped potential for stock value appreciation.
Trading at an earnings multiple of 35, Microsoft’s stock stands primed for a 35% price surge to $552 by the time EPS climbs to $15.65 in three years. With AI’s prowess fueling Microsoft’s upward trajectory, the stock could command a premium valuation, unlocking further upside.
With Microsoft’s stock presenting a compelling investment opportunity, prospective investors should take note of the company’s ascendancy.