Technology giant Microsoft’s (MSFT) growth story began long ago. Artificial intelligence (AI) I entered the picture. With a strong product portfolio, the company has built a highly successful business and has steadily increased revenue and profits over the past decade.Microsoft stock is back 973% in the last 10 years. In 2023, the stock is up 56% for him, driven by an AI rush and strong quarterly numbers.
Recent 2nd quarter of 2024 It proved to be an impressive story. Microsoft says: Second quarter financial results announcement In addition to our own research, external studies have shown that generative AI can lead to a 70% increase in productivity, suggesting that AI will play a key role in the future transformation of work.
Given its AI-powered cloud strengths, Microsoft is likely to reach its high price target of $600 by the end of the year. MSFT stock worth $3 trillion rises 9.3% year-to-dateThis outpaced the 5.8% rise in the tech-heavy Nasdaq Composite Index ($NASX).
Microsoft’s cloud platform drives incredible growth
Azure, Microsoft’s cloud computing platform, is a growth engine. Azure ranks second in the cloud computing market; 22% shareis lagging behind Amazon’s (AMZN) AWS (Amazon Web Services).
inside Second quarter Intelligent Cloud segment revenue for fiscal year 2024 was $25.9 million, an increase of 20% year over year. The segment’s operating income also increased 40% to $3.6 billion. The division accounted for 42% of Microsoft’s total revenue of $62 billion, up 18% from the year-ago period, and its adjusted profit rose 26% year-over-year to $21.9 billion.Sales and profits exceeded consensus expectations.
Notably, revenue from Azure and other cloud services grew 30% year-over-year in the quarter. CEO Satya Nadella emphasized: Second quarter financial results announcement Azure AI currently has 53,000 customers.
Microsoft is now integrating AI into all of its products, including Windows, Office 365, and more, to improve performance in each segment. A slow recovery in the personal computing market hampered the sector last quarter, but it rose 19% to $16.9 billion in the second quarter.
Additionally, in the Productivity and Business Processes sector, Microsoft Cloud products increased commercial business remaining performance obligations (RPO) by 17%. RPO measures future revenue opportunity, or contract revenue that has not yet been recognized. The company expects 45% of the RPO to be recognized as revenue over the next 12 months.
The AI wave continues to paint a bright future for MSFT
Looking ahead, management expects Productivity and Business Processes revenue to increase 10% to 12% in the third quarter to $19.3 billion to $19.6 billion due to increased long-term Azure contracts and renewals. I am.
Similarly, the Intelligent Cloud segment could grow by 18%-19% driven by Azure AI, and the Personal Computing segment’s revenue could increase by 11%-14%. Microsoft ended the quarter with the following results: Large amounts of cash and cash equivalents, short-term investment balances are $81 billion, and long-term debt is $44.9 billion. Management plans to continue to expand the company’s cloud operations and investments in AI.
For the full year, Analysts expect sales and profits to increase 15.2% and 19.1%, respectively. Microsoft trading price Profits in fiscal 2024 will be 34 times higher and sales will be 12 times higher. The valuation seems high, but the premium may be justified given Microsoft’s long-term AI growth prospects.
What are analysts saying about Microsoft stock?
Wall Street remains optimistic about the tech giant, with a consensus rating of Strong Buy. Out of 36 analysts, 32 rate MSFT stock as a “strong buy,” three rate it as a “fair buy,” and one rate it as a “hold.”
of Average target price for MSFT stock is $421.75, 2.6% above current levels. However, the high price target of $600 means there is 45.9% upside potential.
Important points
While the technology industry is currently highly competitive, with major companies vying to take advantage of the AI opportunity, Microsoft has several advantages. Rich industry experience, powerful AI platform, strategic investments, and legacy product portfolio propel the company to the forefront. I believe Microsoft’s revenue will continue to grow at a rapid pace and the stock price will soar in the coming years. MSFT could be one of the best growth stocks to buy and hold indefinitely.
On the date of publication, Sushree Mohanty did not have any positions (directly or indirectly) in any securities mentioned in this article. All information and data in this article is for informational purposes only. For more information, please see the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
