2. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Funds: 279
Microsoft Corporation (NASDAQ:MSFT) is a leading technology company that ranks 2nd on our list of best stocks to buy and hold for 3 years. It is known for a wide range of devices, software, and services. Some of the core offerings by the company include productivity software including Microsoft Office and Azure, the Windows operating system, and Gaming devices such as Xbox consoles.
Microsoft Corporation (NASDAQ:MSFT) is leading the AI transformation through its intelligent cloud, Azure, and its advanced artificial intelligence (AI) tool, Copilot. During the fiscal first quarter results of 2025, the company generated $65.6 billion in revenue, up 16% year-over-year. The growth was on the back of Microsoft Cloud, which surpassed $38.9 billion in revenue, up 22%. The segment was driven by Azure which led the server products and cloud services revenue to increase 23%. Management noted that Azure Arc now has over 39,000 customers across every industry, up more than 80% year-over-year.
In addition to its cloud business, the AI business is taking significant leaps forward. Management during the call highlighted that its AI business is on track to surpass an annual revenue run rate of $10 billion next quarter, making it the fastest business to reach the milestone in Microsoft Corporation’s (NASDAQ:MSFT) history. On November 17, the company announced that it is collaborating with Accenture and Avanade to help businesses transform their operations using advanced technologies like generative AI and Microsoft’s Copilot tools. The partnership is expected to further enhance its product offerings, increasing customer engagement and driving financial growth for the company.
RiverPark Large Growth Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q3 2024 investor letter:
“Microsoft Corporation (NASDAQ:MSFT): MSFT was a top detractor in the third quarter following a fiscal fourth quarter earnings report that featured inline operating metrics but mixed guidance. Positively, the company reported strong revenue (+15%) and earnings growth (+10%), powered by Azure (+30%), and operating margins of 43%. Guidance however calls for lower than expected fiscal first quarter Azure revenue as infrastructure constraints limit growth, and higher capital expenditures throughout the company’s fiscal 2025 to alleviate these constraints. The company expects growth to reaccelerate in the back half of fiscal 2025 as more AI capacity comes online.
Cloud-based services have become the company’s largest revenue and earnings producer. The company’s Azure platform alone has the potential to grow to more than $200 billion in annual revenue over the next decade. Overall, we believe that the company will continue to deliver double-digit revenue and EPS growth and generate an enormous amount of free cash flow to return to shareholders and use for acquisitions.”
