2. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Investors: 279
Jim Cramer reported that Microsoft Corporation (NASDAQ:MSFT) has announced a 10% increase in its quarterly dividend and approved a new $60 billion stock buyback program. Morgan Stanley analysts noted that this dividend increase aligns with similar boosts over the past nine years, while Deutsche Bank commented that the plan shows management’s commitment to profitable growth.
“Club name Microsoft announced a 10% increase in its quarterly dividend and approved a new $60 billion stock buyback program. Morgan Stanley research analysts said the dividend boost is in-line with increases over the past nine years. Deutsche Bank said the plan signals that management is “committed to profitable growth.”
Microsoft Corporation (NASDAQ:MSFT) is supported by its strong earnings, impressive growth in cloud services, and advancements in AI technology. In its latest quarterly report, Microsoft Corporation (NASDAQ:MSFT) reported $56.19 billion in revenue for Q4 2023, driven by increasing demand for its cloud offerings, especially Azure, which continues to lead the enterprise cloud market. This strong position is vital for long-term growth.
Moreover, Microsoft Corporation (NASDAQ:MSFT) is actively investing in AI, incorporating features like Copilot into Office applications, which improves its products and creates new revenue opportunities. Partnerships, such as with OpenAI, enhance its AI capabilities further. Additionally, Microsoft Corporation (NASDAQ:MSFT)’s diverse range of products, including Xbox and LinkedIn, adds stability and growth potential across different sectors.
Microsoft Corporation (NASDAQ:MSFT)’s plans to expand its AI services and invest in data centers show its commitment to addressing the rising demand for cloud solutions. Together, these elements place Microsoft Corporation (NASDAQ:MSFT) in a strong position for future growth, supporting a bullish outlook on its market potential.
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.”
