Microsoft Stock (MSFT) Shrugs Off Macro Blues and Returns to Record Highs
Microsoft (MSFT) is rapidly solidifying its leadership in the AI race, fueled by the strength of Azure's cloud platform, the transformative impact of Microsoft 365 Copilot, and strategic investments in AI infrastructure. These growth drivers are delivering impressive revenue and earnings momentum, helping justify the stock's premium valuation, especially for long-term investors. In an AI-driven future, Microsoft's position at the top appears firmly secured.
Confident Investing Starts Here:
Looking at the tech giant's share price in recent months is a far cry from where sentiment was back in March, when Donald Trump's trade policies with China and fears of a U.S. recession unsettled the stock, sending it back to $350 per share. Given the strong bounce-back, I remain bullish on the stock.
Today, every Fortune 500 CEO is racing to integrate AI into their business, and Microsoft's Azure has become the engine powering that transformation. Azure's revenue soared 33% last quarter—well ahead of Wall Street's 30% estimate —with AI services accounting for nearly half of that growth. Microsoft reported $26.75 billion in cloud revenue, up 21% year-over-year, thanks to Azure's ability to deliver customized AI solutions, from predictive analytics in retail to real-time fraud detection in finance. At Build 2025, Microsoft showcased updates to its Maia AI chip, reinforcing its role as an innovation leader in the space.
What stands out is the real-world impact. For instance, Walmart (WMT) is using Azure to streamline its supply chain through AI models that anticipate demand surges. Microsoft CFO Amy Hood noted on the latest earnings call that the company is working to expand data center capacity to meet what she called 'insatiable' demand. While infrastructure constraints remain a challenge, they serve as a testament to Azure's accelerating momentum. Simply put, Azure has become the digital backbone of the AI era—and Microsoft is making sure it stays that way.
MSFT Envisages Everyone to Have an AI Copilot
Let's turn to Microsoft 365 Copilot, the company's AI-powered productivity assistant that's rapidly becoming an indispensable tool for modern workplaces. Capable of drafting emails, analyzing data in Excel, and even assisting with real-time coding, Copilot is transforming how employees interact with everyday software. In the most recent quarter, Microsoft's Productivity and Business Processes segment, which includes Copilot, generated $29.94 billion in revenue, marking a 10% year-over-year increase and surpassing analyst expectations. Notably, Barclays' decision to roll out 100,000 Copilot licenses highlights growing enterprise adoption across multiple industries.
What sets Copilot apart is its deep integration within the Microsoft ecosystem—seamlessly functioning across Teams, Outlook, Word, and more. This embedded approach provides users with enhanced functionality without disrupting existing workflows. At the Build 2025 conference, Microsoft showcased Copilot's ability to automate routine desktop tasks, positioning it not just as a tool but as a true digital collaborator.
CEO Satya Nadella highlighted use cases in sectors like healthcare, where organizations are leveraging Copilot to streamline administrative tasks such as managing patient records, despite some initial concerns about data privacy. While the $30-per-user monthly fee may give some decision-makers pause, the potential for significant time savings makes a strong case. Ultimately, Microsoft is redefining productivity by embedding AI at the core of the digital workplace.
MSFT Earmarks Future AI Spend, Byte by Byte
Microsoft is allocating a massive $80 billion toward AI infrastructure this year, accelerating its data center expansion at a rapid clip. However, last quarter marked a slight decline in capital expenditures—from $22.6 billion to $21.4 billion—signaling a shift from sheer scale to strategic efficiency. Rather than cost-cutting, this appears to reflect Microsoft's growing confidence in its internal AI capabilities. As the chart indicates, MSFT's R&D spend remains the most considerable portion of its operating expenses.
A prime example is the Discovery platform, which recently identified a non-toxic data center coolant in just 200 hours, showcasing how AI is already improving operational efficiency. CEO Satya Nadella has also emphasized that refining AI models, whether developed with OpenAI or independently, is significantly reducing costs while enhancing performance.
This disciplined investment approach seems to be paying off. Major clients, such as Siemens, are already leveraging Microsoft's AI for advanced manufacturing processes, underscoring the tangible, real-world impact of these efforts. Microsoft's bet on more innovative AI-driven infrastructure appears not only calculated but increasingly validated.
MSFT's Profit Machine Keeps Humming
Here's where the investment case for Microsoft becomes especially compelling. Azure and Copilot aren't just driving revenue—they're fueling significant profit expansion. These high-margin segments are helping lift Microsoft's net margins toward the 45–50% range, up from the high 30% level earlier in fiscal Q1 2025. Analysts project earnings per share will grow by 13.5% this year, with Q3 FY25 already posting an impressive $3.46 per share—a robust 18% year-over-year increase. Microsoft's bottom-line growth is clearly accelerating, powered by the scalability of its AI initiatives.
Yes, Microsoft stock trades at a premium P/E of 35, but exceptional companies rarely come cheap. With strong execution across cloud, AI, and productivity tools, the market's valuation reflects real momentum, not just hype. Investors waiting for a significant pullback may find themselves on the sidelines as Microsoft continues to outperform its peers. This is a business in its prime, and the long-term upside remains firmly intact.
What is Microsoft's 12-Month Price Target?
Despite trading near its highs, Wall Street remains extremely bullish on MSFT stock. MSFT features a Strong Buy consensus rating, with 31 analysts currently bullish and five neutral. Not a single analyst is bearish on the stock. MSFT's average stock forecast of $514.93 indicates upside potential of about 10% over the next twelve months.
Microsoft at Full Throttle Justifies Its Premium
Microsoft's AI-powered rise is a standout example of strategic innovation and flawless execution. With Azure, Copilot, and well-timed infrastructure investments driving both top-line and bottom-line growth, the company's premium valuation looks well-earned.
Backed by $80 billion in AI-related investments and a clear commitment to staying ahead of industry trends, Microsoft is firmly positioned at the forefront of the AI revolution. I continue to view MSFT as a premier tech holding—operating at peak performance with strong momentum and no indication of slowing down.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
an hour ago
- Yahoo
Top economist who previously sounded the alarm on tariffs sees a possible scenario where Trump ‘outsmarted all of us'
Torsten Sløk, chief economist at Apollo Global Management, laid out a potential scenario where President Donald Trump's tariffs are extended long enough to ease economic uncertainty while also providing a significant bump to federal revenue. That comes as the 90-day pause on Trump's 'reciprocal tariffs' is nearing an end. Businesses and consumers remain in limbo over what will happen next with President Donald Trump's tariffs, but a top economist sees a way to leave them in place and still deliver a 'victory for the world.' In a note on Saturday titled 'Has Trump Outsmarted Everyone on Tariffs?', Apollo Global Management Chief Economist Torsten Sløk laid out a scenario that keeps tariffs well below Trump's most aggressive rates long enough to ease uncertainty and avoid the economic harm that comes with it. 'Maybe the strategy is to maintain 30% tariffs on China and 10% tariffs on all other countries and then give all countries 12 months to lower non-tariff barriers and open up their economies to trade,' he speculated. That comes as the 90-day pause on Trump's 'reciprocal tariffs,' which triggered a massive selloff on global markets in April, is nearing an end early next month. The temporary reprieve was meant to give the U.S. and its trade partners time to negotiate deals. But aside from an agreement with the U.K. and another short-term deal with China to step back from prohibitively high tariffs, few others have been announced. Meanwhile, negotiations are ongoing with other top trading partners. Trump administration officials have been saying for weeks that the U.S. is close to reaching deals. On Saturday, Sløk said extending the deadline one year would give other countries and U.S. businesses more time to adjust to a 'new world with permanently higher tariffs.' An extension would also immediately reduce uncertainty, giving a boost to business planning, employment, and financial markets. 'This would seem like a victory for the world and yet would produce $400 billion of annual revenue for US taxpayers,' he added. 'Trade partners will be happy with only 10% tariffs and US tax revenue will go up. Maybe the administration has outsmarted all of us.' Sløk's speculation is notable as he previously sounded the alarm on Trump's tariffs. In April, he warned tariffs have the potential to trigger a recession by this summer. Also in April, before the U.S. and China reached a deal to temporarily halt triple-digit tariffs, he said the trade war between the two countries would pummel American small businesses. More certainty on tariffs would give the Federal Reserve a clearer view on inflation as well. For now, most policymakers are in wait-and-see mode, as tariffs are expected to have stagflationary effects. But a split has emerged. Fed Governor Christopher Waller said Friday that economic data could justify lower interest rates as early as next month, expecting only a one-off impact from tariffs. But San Francisco Fed President Mary Daly also said Friday a rate cut in the fall looks more appropriate, rather than a cut in July. Still, Sløk isn't alone in wondering whether Trump's tariffs may not be as harmful to the economy and financial markets as feared. Chris Harvey, Wells Fargo Securities' head of equity strategy, expects tariffs to settle in the 10%-12% range, low enough to have a minimal impact, and sees the S&P 500 soaring to 7,007, making him Wall Street's biggest bull. He added that it's still necessary to make progress on trade and reach deals with big economies like India, Japan and the EU. That way, markets can focus on next year, rather near-term tariff impacts. 'Then you can start to extrapolate out,' he told CNBC last month. 'Then the market starts looking through things. They start looking through any sort of economic slowdown or weakness, and then we start looking to '26 not at '25.' This story was originally featured on Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Gizmodo
an hour ago
- Gizmodo
The $50 Billion Company That Does Almost Nothing
Something strange is happening on Wall Street. It isn't Elon Musk, AI, or a late-night post from Donald Trump. It's a crypto company called Circle Internet Group, and it's making the market feel like the glory days of the dot-com bubble are back. Circle went public on June 5. In just eleven trading sessions, its stock exploded by an almost unprecedented 675%, adding over $42 billion to its market cap. The company now trades at a valuation that puts it in the same league as tech unicorns and AI moonshots, commanding a price that has investors paying, in essence, $295 for every $1 of its earnings. There's just one problem. Circle doesn't have revolutionary AI. It doesn't build sleek consumer gadgets. Its business model is shockingly simple. Here's how it works: You give Circle a dollar. They give you a digital token, called USDC, worth that same dollar. They then take your actual dollar, invest it in something safe like short-term U.S. Treasury bonds, and collect the interest. You get the token. They get the profit. That's it. That's the entire business. This has led critics to label Circle as little more than a glorified 'money wrapper.' So why is Wall Street treating it like the next Tesla? The answer is one word: stablecoin. USDC is a stablecoin, a digital token pegged to a stable asset, in this case, the U.S. dollar. The idea is that for every USDC token, there's a real dollar sitting in a reserve account. This makes it incredibly useful for crypto traders who need the speed of digital assets without the wild volatility of Bitcoin. And now, the bulls are betting that stablecoins are about to go mainstream. The Senate just passed the 'Genius Act,' landmark legislation that paves the way for banks, fintechs like PayPal, and even retailers like Walmart and Amazon to use stablecoins for payments. Suddenly, the dream of crypto becoming a real alternative to Visa or Mastercard seems within reach. Analysts are salivating. Citi predicts the stablecoin market could hit $3.7 trillion by 2030. In that scenario, Circle, as a neutral platform not tied to any single bank, is perfectly positioned to cash in. But there's a catch. The business model that seems so brilliant in a high-interest-rate environment is also its greatest weakness. 'Circle's whole business is literally glued to Fed policy,' one user wrote in a viral post on Reddit's r/wallstreetbets. 'It's a Treasury ETF in a trench coat.' If the Federal Reserve cuts rates, Circle's main revenue stream shrinks. There's also nothing stopping bigger players from launching their own lookalike stablecoins, erasing Circle's edge overnight. If everyone's offering the same thing, Circle's moat starts looking very shallow. And yet, Wall Street is piling in like it's the next OpenAI. What if regulators change their tune? The entire model could be at risk. The business is remarkably fragile. When contacted by Gizmodo, a spokesperson said the company was in a post-IPO 'quiet period,' legally restricting it from making promotional statements. For now, the hype is winning. Circle's stock is on fire, fueled by the promise of a future where we all pay for our coffee with digital dollars. But beneath the surface, this $50 billion company doesn't innovate or disrupt. It just holds your cash, gives you a digital receipt, and pockets the interest. And in the bizarre world of 2025 finance, that's apparently enough to be crowned the new king of Wall Street.
Chicago Tribune
an hour ago
- Chicago Tribune
How Senate Republicans want to change the tax breaks in Trump's big bill
WASHINGTON — House and Senate Republicans are taking slightly different approaches when it comes to the tax cuts that lawmakers are looking to include in their massive tax and spending cuts bill. Republicans in the two chambers don't agree on the size of a deduction for state and local taxes. And they are at odds on such things as allowing people to use their health savings accounts to help pay for their gym membership, or whether electric vehicle and hybrid owners should have to pay an annual fee. The House passed its version shortly before Memorial Day. Now the Senate is looking to pass its version. While the two bills are similar on the major tax provisions, how they work out their differences in the coming weeks will determine how quickly they can get a final product over the finish line. President Donald Trump is pushing to have the legislation on his desk by July 4th. Here's a look at some of the key differences between the two bills: The child tax credit currently stands at $2,000 per child. The House bill temporarily boosts the child tax credit to $2,500 for the 2025 through 2028 tax years, roughly the length of President Donald Trump's second term. It also indexes the credit amount for inflation beginning in 2027. The Senate bill provides a smaller, initial bump-up to $2,200, but the bump is permanent, with the credit amount indexed for inflation beginning next year. Trump promised on the campaign trail that he would seek to end income taxes on tips, overtime and Social Security benefits. Also, he would give car buyers a new tax break by allowing them to deduct the interest paid on auto loans. The House and Senate bills incorporate those promises with temporary deductions lasting from the 2025 through 2028 tax years, but with some differences. The House bill creates a deduction on tips for those working in jobs that have customarily received tips. The House also provides for a deduction for overtime that's equal to the amount of OT a worker has earned. The Senate bill comes with more restrictions. The deduction for tips is limited to $25,000 per taxpayer and the deduction for overtime is limited to $12,500 per taxpayer. The House and Senate bills both provide a deduction of up to $10,000 for interest paid on loans for vehicles made in the United States. And on Social Security, the bills don't directly touch the program. Instead, they grant a larger tax deduction for Americans age 65 and older. The House sets the deduction at $4,000. The Senate sets it at $6,000. Both chambers include income limits over which the new deductions begin to phase out. The caps on state and local tax deductions, known in Washington as the SALT cap, now stand at $10,000. The House bill, in a bid to win over Republicans from New York, California and New Jersey, lifts the cap to $40,000 per household with incomes of less than $500,000. The credit phases down for households earning more than $500,000. The Senate bill keeps the cap at $10,000. That's a non-starter in the House, but Republicans in the two chambers will look to negotiate a final number over the coming weeks that both sides can accept. The House bill prohibits states from establishing new provider taxes or increasing existing taxes. These are taxes that Medicaid providers, such as hospitals, pay to help states finance their share of Medicaid costs. In turn, the taxes allow states to receive increased federal matching funds while generally holding providers harmless through higher reimbursements that offset the taxes paid. Such taxes now are effectively capped at 6%. The Senate looks to gradually lower that threshold for states that have expanded their Medicaid populations under the Affordable Care Act, or 'Obamacare,' until it reaches 3.5% in 2031, with exceptions for nursing homes and intermediate care facilities. Industry groups have warned that limiting the ability of states to tax providers may lead to some states making significant cuts to their Medicaid programs as they make up for the lost revenue in other ways. The Medicaid provision could be a flashpoint in the coming House and Senate negotiations. Sen. Josh Hawley, R-Mo., was highly critical of the proposed Senate changes. 'This needs a lot of work. It's really concerning and I'm really surprised by it,' he said. 'Rural hospitals are going to be in bad shape.' The House bill would allow companies for five years to fully deduct equipment purchases and domestic research and development expenses. The Senate bill includes no sunset, making the tax breaks permanent, which was a key priority of powerful trade groups such as the U.S. Chamber of Commerce. Republicans in both chambers are looking to scale back the clean energy tax credits enacted through then-President Joe Biden's climate law. It aimed to boost the nation's transition away from planet-warming greenhouse gas emissions toward renewable energy such as wind and solar power. Under the Senate bill, the tax credits for clean energy and home energy efficiency would still be phased out, but less quickly than under the House bill. Still, advocacy groups fear that the final measure will threaten hundreds of thousands of jobs and drive up household energy costs. The House bill would allow millions of Americans to use their health savings accounts to pay for gym memberships, with a cap of $500 for single taxpayers and $1,000 for joint filers. The Senate bill doesn't include such a provision. The House reinstates a charitable deduction for non-itemizers of $150 per taxpayer. The Senate bill increases that deduction for donations to $1,000 per taxpayer. Republicans in the House bill included a new annual fee of $250 for EV owners and $100 for hybrid owners that would be collected by state motor vehicle departments. The Senate bill excludes the proposed fees.
