2. Microsoft Corp. (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Microsoft Corp. (NASDAQ:MSFT) is a tech giant that makes software and hardware, mostly known for its Windows operating system, which runs on most personal computers. Beyond that, it’s big in cloud computing with its Azure platform, used by businesses to store and process data. It’s also known for its gaming products such as the Xbox and its search engine Bing.
Its strong performance in FQ1 2025 was driven by the robust growth of its cloud business, particularly Azure, which surpassed $38.9 billion in revenue, a 22% increase year-over-year. Overall, Microsoft Corp. (NASDAQ:MSFT) grew its revenue by 16.04% in FQ1 2025, recording an amount of $65.59 billion. Its continued investment in AI is driving significant growth. The company’s AI-driven innovations are transforming industries, with its AI business on track to achieve a $10 billion annual revenue run rate in the next quarter, making it the fastest-growing business in the company’s history.
The company is strongly committed to developer productivity, evident in the advancements made to GitHub Copilot, an AI-powered coding assistant, which is empowering developers to build software more efficiently. The introduction of GitHub Copilot Workspace and Copilot Auto Fix is further streamlining the development process and improving code quality.
The company’s strong AI-driven growth, particularly in Azure, positions it for future success. While near-term challenges persist, the long-term outlook remains bullish due to the accelerating adoption of AI technologies.
Baron Opportunity Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q3 2024 investor letter:
“Microsoft Corporation (NASDAQ:MSFT) is the world’s largest software and cloud computing company. Microsoft was traditionally known for its Windows and Office products, but over the last five years it has built a $147 billion run-rate cloud business, including its Azure cloud infrastructure service and its Office 365 and Dynamics 365 cloud-delivered applications. Shares gave back some gains from strong performance over the first half of this year. For the fourth quarter of fiscal year 2024, Microsoft reported a strong quarter with total revenue growing 16%, in line with the Street; Microsoft Cloud up 22%; Azure up 30%; 43% operating income margins; and 36% free cash flow margins. Core Azure growth came in one point shy of expectations, however, due to a soft European market and continued constraints on AI compute capacity. In the same vein, while Microsoft reiterated its fiscal 2025 targets of double-digit top-line and operating income growth, quarterly guidance called for Azure growth to slow a bit before accelerating in the back half of the fiscal year, as capital expenditures increase, yielding an expansion of AI compute capacity. We believe this investment is a leading indicator for growth, with more than half of the spend related to durable land and data center build outs, which should monetize over the next 15-plus years. We remain confident that Microsoft is one of the best-positioned companies across the overlapping software, cloud computing, and AI landscapes, and we remain investors.”
