2. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 279
Microsoft Corporation (NASDAQ:MSFT) creates and grants licenses for both commercial and consumer software. It is renowned for the Office productivity suite and Windows operating systems. The company is divided into three equally sized broad segments: intelligence cloud (which includes infrastructure and platform-as-a-service offerings like Azure, Windows Server OS, SQL Server), productivity and business processes (which includes legacy Microsoft Office, cloud-based Office 365, Exchange, SharePoint, Skype, LinkedIn, Dynamics), and more personal computing (which includes Windows Client, Xbox, Bing search, display advertising, and Surface laptops, tablets, and desktops).
The giant American tech company is one of two public cloud providers capable of delivering a broad range of PaaS/IaaS solutions at scale. The firm has become a leader in AI as well, mainly because of its investment in OpenAI. Notably, the American tech company has had remarkable success upselling customers on higher-priced Office 365 subscriptions that come with advanced phone functionality. These elements work together to create a more concentrated business that produces remarkable revenue growth, high and rising margins, and strengthens relationships with clients.
The company has revised its revenue estimate for the current quarter to between $63.8B and $64.8B from the $65.07B estimate. Azure revenue for MSFT is anticipated to grow by 28% and 29% annually.
Analysts believe that the company’s growth in a number of sectors during the most recent quarter can be attributed to the integration of Copilot AI. Dynamics software sales have climbed by 19% YoY, while office commercial sales have increased by 10% YoY to $48 billion. Because of its AI features, Bing Search saw a 3% YoY gain in users who were previously using Google Search.
Alger Spectra Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q2 2024 investor letter:
“Microsoft Corporation (NASDAQ:MSFT) is a beneficiary of corporate America’s transformative digitization. The company operates through three segments: Productivity and Business Processes (Office, LinkedIn, and Dynamics), Intelligent Cloud (Server Products and Cloud Services, Azure, and Enterprise Services), and More Personal Computing (Windows, Devices, Gaming, and Search). During the quarter, shares contributed to performance after the company reported strong fiscal third quarter results, underscoring its leadership position in the cloud and highlighted its role as a primary facilitator and beneficiary of AI adoption. Company revenue growth, operating margin, and earnings growth surpassed consensus expectations. The utility scale Azure cloud business grew 31% in constant currency of which 7% was AI related versus 3% two quarters ago. Further, management noted most of the AI revenue continues to stem from inference rather than training indicating high quality AI applications by Microsoft’s clients. Management also indicated that the significant cost-cutting programs in corporate America are done, suggesting that the cost optimization headwinds previously impacting Azure’s growth are over. Separately, management provided color on their new AI-productivity tool, Copilot, noting that approximately 60% of Fortune 500 companies are already using Copilot, and that the quarter witnessed a 50% increase in Copilot assistance integration within Teams. We continue to believe that Microsoft has the potential to hold a leading position in AI, given its innovative approach and demonstrated high unit volume growth opportunity.”
Among the hedge funds tracked by us, Michael Larson’s Bill & Melinda Gates Foundation Trust was the largest shareholder in the company, with 34,889,597 shares worth $15.60 billion.
