We recently published a list of 10 Best Software Infrastructure Stocks to Buy According to Analysts. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against other best software infrastructure stocks to buy according to analysts.
Companies today allocate significant resources to various aspects of software infrastructure, including servers and data centers for secure data storage and processing, cloud migration and management for scalable environments, network monitoring and management to ensure stability and security, and communication software. Additionally, software delivery and deployment solutions streamline application deployment, while bug tracking and error handling systems manage and resolve software issues. The increasing demand for cloud computing, digital transformation, and the integration of advanced technologies like artificial intelligence and machine learning are expected to drive substantial growth in the global software infrastructure sector. As organizations continue to prioritize agility, scalability, and efficiency, the software infrastructure market is projected to expand rapidly.
According to a January 2025 report by The Business Research Company, the infrastructure software market size is projected to grow from $210 billion in 2024 to $220 billion in 2025, with a growth rate of 5.1%. The market has experienced strong growth in recent years due to spending on legacy system modernization, the increase in remote work, cybersecurity concerns, automation, and application performance optimization. The research firm anticipates continued strong growth, with the market expected to reach around $283 billion by 2029, at a compounded annual growth rate (CAGR) of 6.5%.
Major players in the sector will continue to play a significant role by investing heavily in enhancing their offerings to capture market share. These companies are focusing on developing innovative solutions that leverage AI and automation to improve operational efficiency and enhance the user experience.
Cantor Fitzgerald analyst Thomas Blakey recently initiated coverage of 18 names in infrastructure and artificial intelligence software. In a research note to investors, he highlighted the growing importance of infrastructure software due to the ongoing secular expansion of AI and generative AI. These developments drive the demand for unified, secure, and highly integrated data systems, observable infrastructure, real-time computing and networking capabilities, and enhanced workflows and collaboration. Additionally, the analyst expects cloud infrastructure platforms to be pivotal in consolidating these functions.
Our Methodology
To identify the 10 best software infrastructure stocks, we conducted extensive research to compile a list of fundamentally strong U.S. listed software infrastructure companies with a market capitalization of $2 billion and above. We then ranked the stocks in ascending order of their potential upside, with the stock having highest upside ranked at the top.
Note: All pricing data is as of market close on February 7.
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A development team working together to create the next version of Windows.
Microsoft Corporation (NASDAQ:MSFT)
Upside Potential: 22%
Number of Hedge Funds: 279
Microsoft Corporation (NASDAQ:MSFT) is a giant in the tech industry, offering a broad array of software, services, devices, and solutions designed to empower individuals and organizations to achieve productivity and computing prowess. Its cloud computing platform, Azure, is a major player in the cloud services market, providing scalable and flexible solutions for businesses of all sizes. Additionally, Microsoft Corp. (NASDAQ:MSFT) offers products such as Microsoft 365, Windows, LinkedIn, Dynamics business solutions, server products, and gaming.
The company is currently focusing on integrating AI across its products to enhance data processing capabilities and operational efficiency, which should increase demand for its offerings. It has been aggressively expanding its cloud services, with Azure experiencing substantial growth driven by the rising demand for cloud computing and AI solutions. In its Q2 FY 2025 (FY ending June 2025) report on January 29, Microsoft Corp. (NASDAQ:MSFT) reported a total revenue growth of 12% year-over-year (YoY), with cloud revenue growing 21% and achieving a gross margin of 70%. They are also planning to invest about $80 billion in fiscal 2025 on developing data centers in order to train AI models and deploy AI and cloud-based applications. Company CFO Amy Hood remains optimistic about AI-driven cloud services growth, stating:
“Revenue will continue to be driven by Azure, which, as a reminder, can have quarterly variability primarily from in-period revenue recognition depending on the mix of contracts. In Azure, we expect Q3 revenue growth to be between 31% and 32% in constant currency driven by strong demand for our portfolio of services. As we shared in October, the contribution from our AI services will grow from increased AI capacity coming online. In non-AI services, healthy growth continues, although we expect ongoing impact through H2 as we work to address the execution challenges noted earlier.”
Overall, MSFT ranks 9th on our list of best software infrastructure stocks to buy according to analysts. While we acknowledge the potential of MSFT to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. 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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Disclosure: None. This article is originally published at Insider Monkey.
