Microsoft (MSFT) stock crossed the remarkable $4 trillion market cap milestone today, joining chip maker Nvidia (NVDA) in the $4 trillion market cap club. On July 30, the tech giant reported blockbuster results for the fourth quarter of fiscal 2025, exceeding analyst expectations on both sales and earnings. Microsoft attributed its performance to robust demand for cloud and artificial intelligence (AI) services. The massive market capitalizations of these tech companies underscore how AI is transforming the global business landscape.
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Microsoft’s AI Investments Are Paying Off Handsomely
In Q4, Microsoft spent a hefty $24.2 billion on advancing its cloud infrastructure and AI research ambitions, which has paid off handsomely. The company’s Azure cloud computing segment exceeded $75 billion in annual revenues, up 34% over FY24 and above analysts’ estimates of $74.62 billion. Microsoft’s Copilot AI tools also surpassed 100 million monthly active users.
On the AI model front, Microsoft is strengthening its own large language models (LLMs) and integrating its AI tools into an increasing number of MSFT products. Additionally, Microsoft offers generative AI models from OpenAI’s ChatGPT, Meta’s (META) Llama, and Elon Musk’s xAI.
Microsoft Offers a Strong Outlook
For Q1FY26, Microsoft expects to spend approximately $30 billion on building AI infrastructure. Microsoft already has about 400 data centers globally and plans to construct even more to meet soaring demand. Moreover, Microsoft projects a 37% year-over-year growth in its Azure business, higher than analysts’ 33.5% estimate.
Turning to segmental revenue forecasts, Microsoft’s Productivity and Business Processes segment is expected to generate revenue between $32.2 billion and $32.5 billion. The Intelligent Cloud business is projected to earn between $30.1 billion and $30.4 billion, and the More Personal Computing unit is forecasted to produce between $12.4 billion and $12.9 billion.
For Fiscal 2026, total revenue is expected to grow by double-digits, while capital expenditures are projected to “moderate” compared with FY25’s capex of $88.2 billion.
Is MSFT Stock a Buy, Hold, or Sell?
Wall Street remains highly optimistic about Microsoft’s long-term outlook. On TipRanks, MSFT stock has a Strong Buy consensus rating based on 33 Buys and two Hold ratings. The average Microsoft price target of $611.28 implies 14.1% upside potential from current levels. MSFT stock has gained 22.2% so far this year.
