2. Microsoft Corp. (NASDAQ:MSFT)
10-Year Revenue CAGR: 10.94%
Number of Hedge Fund Holders: 279
Microsoft Corp. (NASDAQ:MSFT) develops, manufactures, licenses, supports, and sells computer software, consumer electronics, personal computers, and related services. The most well-known products include the Windows operating system, the Office productivity suite, the Xbox video game console, and the Surface line of laptops and tablets. It also provides cloud computing services through its Azure platform and develops software for servers and embedded systems.
Its Copilot software, an AI-powered productivity assistant, is gaining popularity. Microsoft 365 Copilot customer numbers grew over 60% sequentially in FQ4. With an Office 365 user base exceeding 400 million, its future in productivity tools looks promising. Placing Platform Limited (PPL) has partnered with Microsoft to enhance its specialty insurance trading platform. Through this collaboration, PPL will integrate Microsoft’s data and AI capabilities to create a more efficient and data-driven platform.
Overall, FQ4 2024 revenue was up 15.20% year-over-year. Microsoft Cloud led the way with a 21% increase in revenue. Individual Office sales grew 4%, and Dynamics ERP and CRM software sales increased 19%. Bing saw a 3% increase in usage. Azure revenue surged by 30%. Partnerships with Lumen Technologies and Palantir further solidify its AI leadership and cloud capabilities. The Azure OpenAI revenue grew 30% and the service has seen a 60% surge in customers, reaching 60,000 in the past quarter.
The company’s recent healthcare AI innovations offer a promising but risky investment opportunity. While there’s potential for high growth, the competitive and regulated market presents challenges. Overall, continued investment in AI and cloud infrastructure position it as a market leader.
Generation Investment Management Global Equity Strategy stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q2 2024 investor letter:
“Generative AI’s hunger for power has increased disproportionately with its intelligence. According to one estimate, OpenAI’s GPT-4 required 50 gigawatt hours (GWh) of electricity to train, much more than the 1.3 GWh needed for GPT-3.3 And then AI requires even more power when it is put to use (so called ‘inference’). Some of the latest trends worry us. Microsoft Corporation (NASDAQ:MSFT) appears to be slipping in its ESG goals, with its greenhouse gas emissions rising again last year, as it invests in becoming a big player in AI. It is struggling in particular to curb its Scope 3 emissions in the capital goods category – nowhere more so than in the activity associated with the construction of data centres: both the embedded carbon in construction materials like steel and cement, as well as the emissions from the manufacturing of hardware components such as semiconductors, servers and racks. Google’s emissions have risen by close to 50% in the past five years.
We feel it is worth dwelling on Microsoft for a few moments, since we suspect you will be hearing a lot more about the relationship between AI and sustainability in the coming months. The bottom line is that we continue to see Microsoft as a sustainability leader. In the case of Scope 2 emissions, the company covers 100% of its electricity use with purchases of renewable energy. Crucially, though, the majority of this green energy is directly sourced via power purchase agreements, which bring new renewable capacity to the grid. Microsoft is also committed to operating 24/7 on renewable power by 2030, a policy that will help bring energy storage onto the grid as well…” (Click here to read the full text)
