Company Reports

Microsoft is one of three public cloud providers that can deliver a wide variety of PaaS/IaaS solutions at scale. Based on its investment in OpenAI, the company has also emerged as a leader in AI. Microsoft has also enjoyed great success in upselling users on higher-priced Office 365 versions, notably to include advanced telephony features. These factors have combined to drive a more focused company that offers impressive revenue growth with high and expanding margins and deepening ties with customers. We expect solid overall growth despite the company’s size, and slightly improving margins over time to drive the stock.

Microsoft's fourth-quarter results topped the high end of guidance on key items. Revenue increased 17% year over year in constant currency to $90.0 billion, versus the high end of guidance of $87.8 billion, while operating margin was 45.1%, compared with the high end of guidance implied at 44.7%.

Moonshot AI launched Kimi K3, a 2.8 trillion-parameter open-weight model that, according to benchmarks, is almost as performant as Anthropic's Fable 5 while being cheaper. This launch is putting downward pressure on artificial intelligence companies across hardware and infrastructure.

Microsoft's third-quarter results topped the high end of guidance. Revenue increased 15% year over year in constant currency to $82.9 billion, compared with the high end of guidance of $81.75 billion, while operating margin was 46.3%, compared with the high end of guidance at 46.1%.

The pace of change in the software industry has accelerated in recent months, leading to heightened uncertainty and prompting us to reassess our moat ratings.

Software stocks have underperformed for months, with a sharp sell-off on Feb. 3, which we surmise was driven by Anthropic’s release of the legal plugin for its large language model Claude and by Gartner's stark 2026 guidance, which reflects negatively on the enterprise IT spending environment.

Microsoft's second-quarter results topped the high end of guidance. Revenue increased 15% year over year in constant currency to $81.3 billion, compared with the high end of guidance of $80.6 billion. The operating margin was 47.1%, compared with the high end of guidance at 45.8%.

Microsoft's first-quarter results easily topped the high end of guidance. Revenue increased 17% year over year in constant currency to $77.7 billion, compared with the high end of guidance of $75.8 billion, while operating margin was 48.9%, compared with the high end of guidance at 47.2%.

Microsoft and OpenAI reached a new agreement on their existing partnership.

Microsoft's fourth-quarter results topped the high end of guidance. Revenue increased 18% year over year to $76.4 billion, compared with the high end of guidance of $74.3 billion, while operating margin was 44.9%, compared with the high end of guidance at 43.8%.

Microsoft is one of three public cloud providers that can deliver a wide variety of PaaS/IaaS solutions at scale. Based on its investment in OpenAI, the company has also emerged as a leader in AI. Microsoft has also enjoyed great success in upselling users on higher-priced Office 365 versions, notably to include advanced telephony features. These factors have combined to drive a more focused company that offers impressive revenue growth with high and expanding margins and deepening ties with customers.

Microsoft is one of two public cloud providers that can deliver a wide variety of PaaS/IaaS solutions at scale. Based on its investment in OpenAI, the company has also emerged as a leader in AI. Microsoft has also enjoyed great success in upselling users on higher priced Office 365 versions, notably to include advanced telephony features. These factors have combined to drive a more focused company that offers impressive revenue growth with high and expanding margins and deepening ties with customers.

Microsoft's third-quarter results topped the high end of the firm's guidance. Revenue increased 13% year over year to $70.1 billion, compared with the high end of guidance of $68.7 billion while operating margin was 45.7%, compared with the high end of guidance at 44.6%.

We are highlighting wide-moat Microsoft as one of our top technology stocks, as shares look attractive relative to our fair value estimate of $490 per share. We think the stock is set up well for 2025, with relatively stagnant performance over the last 12 months. Our long-term thesis centers on the expansion of hybrid cloud environments, the proliferation of artificial intelligence, and Azure. The firm continues to use its on-premises dominance to allow clients to move to the cloud at their own pace. We center our growth assumptions around Azure, Microsoft 365 E5 migration, and traction with the Power Platform for long-term value creation.

We are maintaining our fair value estimate for wide-moat Microsoft at $490 per share after the firm reported good results with guidance that was somewhere between our expectations and slightly light. The outlook generally offsets quarterly performance, which holds our fair value steady. Results look solid across the board, with good artificial intelligence demand and monetization. With shares down after-hours we continue to view the stock as attractive, and we think accelerating Azure revenue in the fourth quarter will help drive propel it higher over the next year. We see results reinforcing our long-term thesis, which centers on the expansion of hybrid cloud environments, the proliferation of artificial intelligence, and Azure. The firm continues to use its on-premises dominance to allow clients to move to the cloud at their own pace. We center our growth assumptions around Azure, Microsoft 365 E5 migration, and traction with the Power Platform for long-term value creation.

We have consolidated our recent DeepSeek-related coverage in this note. Artificial intelligence affects companies across much of our coverage, including semiconductors, cloud infrastructure, software, utilities, and energy.

DeepSeek, a Chinese artificial intelligence company, released its open-source reasoning model, R1, earlier this month. The model's capabilities roughly match those of advanced models by OpenAI, Anthropic, and Google while having materially lower training costs.

We are maintaining our fair value estimate for wide-moat Microsoft at $490 per share after the firm reported good results but offered guidance that is mixed versus our expectations. The outlook generally offsets quarterly strength, which holds our fair value in check. Performance looks good from any angle, with impressive artificial intelligence demand and monetization. With shares down slightly after hours following a recent pullback, we see the stock as attractive, and we think accelerating Azure revenue will propel the stock upward over the next year.

We raise our fair value estimate for wide-moat Microsoft to $490 per share, from $435 after the company delivered another good quarter overall, even if it was in line with our expectations on headline numbers. In an earnings call packed with new data points around artificial intelligence-related demand, which were impressive, in our view, the single most important item was guidance that calls for Azure revenue to accelerate in the second half of the year as the current surging investment in data center capacity comes online. Therefore, we raised our revenue growth estimates for the medium term, and we also tweaked our profitability assumptions higher based on consistently good performance and a solid outlook. Revenue was again governed by data center capacity constraints and several pockets of slight weakness arising in Europe. With shares down slightly afterhours following a recent pullback, we see the stock as attractive.

Microsoft is one of two public cloud providers that can deliver a wide variety of PaaS/IaaS solutions at scale. Based on its investment in OpenAI, the company has also emerged as a leader in AI. Microsoft has also enjoyed great success in upselling users on higher priced Office 365 versions, notably to include advanced telephony features. These factors have combined to drive a more focused company that offers impressive revenue growth with high and expanding margins and deepening ties with customers.