1. Microsoft Corp. (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Microsoft Corp. (NASDAQ:MSFT) is a tech company known for its transformative technologies. It has recently made strides in the AI domain. In November, the company unveiled a suite of enhanced AI models tailored to diverse industry needs, expanding its offerings through the Azure AI model catalog.
In FQ1 2025, the company reported a revenue of $65.6 billion, recording a 16% year-over-year increase. This growth was driven by a record-breaking quarterly revenue of $38.9 billion from its cloud services, representing a 22% year-over-year surge. Notably, the Azure segment achieved an impressive 33% revenue growth, fueled by a surge in demand for AI-powered solutions within its cloud offerings.
These developments underscore the efficacy of Microsoft’s strategy in leveraging AI to drive business success. The company has articulated its vision to establish three trusted platforms, strategically designed to maximize the value of AI for businesses, demonstrating its commitment to integrating AI into core business operations. Microsoft Corp. (NASDAQ:MSFT) is well-positioned to capitalize on the burgeoning demand for AI solutions across various sectors, solidifying its leadership position within the technology industry.
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.”
While we acknowledge the growth potential of Microsoft Corp. (NASDAQ:MSFT), our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MSFT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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