All eyes were on Microsoft (NASDAQ: MSFT) after the market close on Wednesday, with investors eager for insight into the traction of artificial intelligence (AI). The company’s latest financial results surpassed expectations, but beneath the surface lies a nugget of information that paints a promising picture of Microsoft’s future.
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A Macroscopic View of the Quarter
Microsoft’s fiscal 2024 Q4 results showcased a 15% year-over-year revenue boost to $64.7 billion, with diluted earnings per share (EPS) climbing 10% to $2.95. Azure, the company’s cloud infrastructure service, led the charge with a 29% growth, propelling the intelligent cloud segment up by 19%. The growth in commercial bookings decreased from Q3’s 29% to 17%.
Focusing on the Impact of AI
Generative AI’s widespread adoption has fueled excitement in the market, especially concerning its impact on Microsoft. During the earnings call, AI was mentioned 24 times, underscoring its importance. CEO Satya Nadella highlighted that Azure AI customers surpassed 60,000, growing by 60% year over year, with increased usage of data and analytics tools. Microsoft’s Copilot, a suite of AI-powered digital assistants, saw a 60% increase in users quarter over quarter.
The Key Metric for Investors
Amidst various metrics, the integration of AI into Microsoft Azure stands out as pivotal. The company’s swift incorporation of AI technologies has positioned it ahead of competitors, evident in Azure’s 31% year-over-year revenue growth in Q1. This growth rate outpaced Microsoft’s “Big Three” rivals, signifying potential market share gains.
CFO Amy Hood noted that AI services contributed significantly to Azure growth, driving five consecutive quarters of accelerated AI contribution. Microsoft’s forward-thinking AI strategy has likely fueled its advancement in the competitive cloud infrastructure landscape.
Trading at 32 times forward earnings, Microsoft commands a slight premium compared to the S&P 500. However, given its strong track record and strategic AI initiatives, the premium valuation seems justified, making Microsoft stock an appealing investment prospect.
Before investing in Microsoft, it’s prudent to consider various factors. The Motley Fool has identified 10 stocks with substantial growth potential, excluding Microsoft. Historical examples like Nvidia’s explosive growth post-recommendation in 2005 illustrate the possible returns from strategic investments.