Microsoft stock (NASDAQ:MSFT) continues to capture investor attention as the tech giant leverages artificial intelligence (AI) to fuel growth across its business segments. Fiscal 2025 results underscore Microsoft’s ability to translate AI hype into tangible revenue and long-term earnings power, raising questions about how long this winning streak can last.
Azure and Cloud Drive Revenue Growth
In fiscal 2025, Microsoft stock benefited from total revenue rising 15% year-over-year to $281.7 billion. Commercial bookings surged past $100 billion for the first time, up 30%, while remaining performance obligations (RPO), which reflect future growth potential, increased 35% to $368 billion. Analysts note that about a third of this RPO is expected to convert into revenue within the next 12 months.
CEO Satya Nadella emphasized that Microsoft’s cloud and AI platforms are central to its expansion. Azure alone generated $75 billion in annual revenue, a 34% increase year-over-year. Across all cloud services, Microsoft Cloud reached $168 billion in revenue, up 23%. Microsoft’s dominance in AI infrastructure, supported by over 400 data centers in 70 regions worldwide, positions the company to capitalize on the accelerating AI trend.
Segment Highlights: Productivity, Gaming, and Personal Computing
Microsoft stock’s growth is also fueled by strong performance in other segments. Productivity and Business Processes revenue grew 14%, primarily driven by Microsoft 365 commercial and consumer cloud offerings. Intelligent Cloud revenue climbed 25%, reflecting robust Azure and cloud services adoption.
Gaming revenue rose 10% as Microsoft strengthened its position as a leading publisher on both Xbox and PlayStation. More Personal Computing revenue increased 9% to $13.5 billion, demonstrating steady demand across hardware and software products. Capital expenditures totaled $24.2 billion, largely invested in AI-focused GPU and CPU infrastructure, yet free cash flow remained strong at $25.6 billion. Shareholders also benefited from $37 billion in dividends and buybacks during the year.
The Long-Term Outlook
Microsoft stock is viewed as a generational AI play rather than a short-term trend. Management anticipates fiscal 2026 will deliver another year of double-digit revenue and operating income growth, supported by record bookings and early-stage AI adoption. Analysts forecast earnings per share of $15.34 in fiscal 2026, rising 17% to $17.93 in fiscal 2027.
Competition is fierce, with Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOGL), and Meta Platforms (NASDAQ:META) also investing heavily in AI. However, Microsoft’s scale, integrated software ecosystem, and enterprise adoption create a competitive moat, suggesting it may maintain its advantage in the AI era for years to come.
Innovation Beyond AI: Quantum Computing
Looking ahead, Microsoft stock is positioning for the next major technology frontier: quantum computing. Recently, Microsoft announced a partnership with Atom Computing to deploy the world’s first operational Level 2 quantum computer. This move signals a decade-long strategic bet, potentially adding another layer of growth and innovation beyond AI and cloud services.
Wall Street’s Take
Wall Street remains optimistic about Microsoft stock. Of the 47 analysts covering MSFT, 39 rate it a “Strong Buy,” five recommend a “Moderate Buy,” and three suggest a “Hold.” The average price target of $622.85 implies roughly 25% upside, while the highest target of $678 suggests potential gains of up to 36% in the next 12 months.
Microsoft stock is currently riding an AI-driven growth wave, with strong cloud revenue, expanding gaming and productivity segments, and strategic long-term bets like quantum computing. For investors seeking exposure to AI innovation and technology leadership, Microsoft continues to be a top contender.
Featured Image: Pixabay© efes
Author Stephanie Bédard-Châteauneuf 
