8. Microsoft Corporation (NASDAQ:MSFT)
Citadel Investment Group’s Stake: $544.1 million
Microsoft Corporation (NASDAQ:MSFT), a global tech leader, specializes in productivity software, cloud solutions, and personal computing products. Its products are distributed through OEMs, distributors, resellers, and directly via digital marketplaces, online platforms, and retail stores.
In FY25 Q1, Microsoft Corporation (NASDAQ:MSFT) posted $65.6 billion in revenue, a 16% year-over-year increase. The strong start to the fiscal year was fueled by Microsoft Cloud, which generated $38.9 billion in revenue. Segment-wise, Productivity and Business Processes revenue grew 12%, Intelligent Cloud rose 20%, and More Personal Computing increased by 17%, year-over-year.
On October 31, Citi reaffirmed its Buy rating on Microsoft Corporation (NASDAQ:MSFT) with a price target of $497, despite a mixed quarterly performance. The company exceeded top and bottom-line expectations, driven by a 1-2% revenue boost from Azure cloud services and a 5% rise in EPS, supported by 23% year-over-year growth in commercial bookings. However, the results were influenced by one-off factors like favorable revenue recognition and foreign exchange rates. Additionally, Microsoft’s Q2 guidance fell short of analyst expectations due to new capacity constraints with a collocation partner, which is projected to slow Azure’s growth by 1-2 percentage points.
Baron Opportunity Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q3 2024 investor letter:
“Microsoft Corporation (NASDAQ:MSFT) is the world’s largest software and cloud computing company. Microsoft was traditionally known for its Windows and Office products, but over the last five years it has built a $147 billion run-rate cloud business, including its Azure cloud infrastructure service and its Office 365 and Dynamics 365 cloud-delivered applications. Shares gave back some gains from strong performance over the first half of this year. For the fourth quarter of fiscal year 2024, Microsoft reported a strong quarter with total revenue growing 16%, in line with the Street; Microsoft Cloud up 22%; Azure up 30%; 43% operating income margins; and 36% free cash flow margins. Core Azure growth came in one point shy of expectations, however, due to a soft European market and continued constraints on AI compute capacity. In the same vein, while Microsoft reiterated its fiscal 2025 targets of double-digit top-line and operating income growth, quarterly guidance called for Azure growth to slow a bit before accelerating in the back half of the fiscal year, as capital expenditures increase, yielding an expansion of AI compute capacity. We believe this investment is a leading indicator for growth, with more than half of the spend related to durable land and data center build outs, which should monetize over the next 15-plus years. We remain confident that Microsoft is one of the best-positioned companies across the overlapping software, cloud computing, and AI landscapes, and we remain investors.”
