If you are thinking about purchasing shares of Microsoft Corp., or already own them, you need be aware of the key aspects and concerns pertaining to the company.

The following numbers demonstrate the way Microsoft MSFT, +2.02% stacks up against competitors and also where it’s strengths and weak points lie. Remember that no two businesses are exactly alike, and even rivals can’t compete in every space. Investors must conduct their own research in order to make educated decisions about the future.
Key dynamics

Since Satya Nadella assumed the role of Chief Executive Officer in February of 2014, and has dramatically altered the direction taken by this software giant founded by Bill Gates, Microsoft has grown into a major cloud computing player. This has paid off handsomely for investors. The stock is up 680 percent since then, not including dividends, more than four times more than the return on an index like the S&P 500 Index SPX, +2.43%.

For the Microsoft stock forecast 2025, make sure you visit StockForecast.com.

There may be more outperformance in the future for the stock because growth remains so robust despite the size Microsoft. Microsoft has an $1.9 trillion value of market capitalization. Most companies of this magnitude aren’t able to post fast growth simply because they’re that big. But this software company, which has been around for 46 years has posted 16.7 percent growth in sales during the fourth quarter.

Microsoft’s cloud products and server offerings, the company’s cloud and server offerings, a $41.4 billion revenue last year, grew 25.8% during the fourth quarter. The most sought-after product line that Microsoft offers is Azure cloud service. Customers love Azure as it helps them become more productive and competitive. This is why they be joining more frequently and extend their use after they sign on.

“We are witnessing the start of a second wave of digital transformation that is sweeping across every business and every industry,” Nadella has said.

Already worth $29 billion a annual basis, Azure revenue is growing by 50% per year, says Goldman Sachs analyst Kash Rangan. (Microsoft doesn’t break down the figures or provide projections for Azure.) Microsoft also offers Artificial Intelligence software Microsoft Office suite products like Word, XL and Outlook and the popular video game hardware the LinkedIn professional social network; and of course, Windows. There are four of these business lines are expanding at more than 10 However, Windows and Google are slow.

Geographic reach

Microsoft is able to do half of its business outside of the U.S. This is a good thing for investors since during periods of rapid, synchronized global growth like we see today new economies are likely to grow significantly faster than U.S.

“We invest to bring our cloud-based services to more customers, and include the addition of seven additional data centre locations in Asia, Europe and Latin America,” Nadella has announced.

A risk could be that an increased dollar will hurt Microsoft in that it could reduce the amount of foreign earnings that are earned as they’re exchanged for greenbacks.

Profitability

The overall picture is that Microsoft doesn’t grow nearly as rapidly as some of its competitors. But the popularity of its cloud-based products and services supports superior profit margins. Investors benefit from this, and it compensates for the slow growth in sales.

“Microsoft has pulled ahead of the pack with a state-of-the-art cloud technology,” states J.P. Morgan analyst Mark Murphy.

Cash and cash flow

Companies that have a large amount of cash as well as a solid cash flow have an advantage as they avoid having to rely on banks or dilutive capital raises. They are in charge of their own destinies. Microsoft makes use of its cash to buy back shares and also pay dividends with a yield of 0.87%. It’s also tapping its cash pile of $132 billion for growth by acquiring.

For example, Microsoft recently announced the purchase from Nuance Communications, which gives Microsoft significant access to the healthcare industry. Nuance offers Artificial Intelligence (AI) that is used in the sector to analyze conversations and aid in communicating with patients.

The possibility is that Microsoft may make bad investments and then squander money, which might otherwise be better utilized by returning it to shareholders. As examples, Microsoft blundered in its purchases of Nokia’s mobile-phone business and the digital-marketing-services company aQuantive. That’s why investors would rather companies return money to shareholders through dividends and buybacks, rather than risk wasting the money.

Moat

Investments that are great Warren Buffett loves companies with moats with protection. Moats boost pricing power and make it difficult for competitors to win over customers. Microsoft has a large moat because of the following reasons, says Dan Romanoff at Morningstar, that, along with Buffett, puts a big emphasis on moats when analyzing businesses.

The first is that a large portion of Microsoft software for business has an extremely steep learning curve and customers are sucked to the software. In addition, changing software can disrupt an organization. This creates switching costs. Next, Microsoft products and services benefit from the network effect. With the increasing number of people using Azure, Microsoft Office, LinkedIn and the like they become important to all users because they bring people together. Network effects bring value to users, preventing them from jumping ship.
Stock valuation and performance

Microsoft stock has outperformed the shares of several rivals over the past five years, but it still has a lower price-to-earnings (P/E) ratio in comparison with them. Take note that young companies like CrowdStrike CRWD, +4.45% can have deceptively large P/E ratios due to the fact that they’re still investing heavily into their own companies, thereby making money by stealing earnings per share.

Sizing up Microsoft

The recent earnings report shows that the negative press surrounding Microsoft may be overdone. Yes there’s a possibility that the Activision Blizzard deal is in jeopardy, leaving some uncertainty about the company’s metaverse strategy. However, with its huge financial position, it’ll likely develop an alternate strategy.

In the end, the huge growth of Azure and its relatively low valuation relative to its growth bode well for Microsoft’s long-term prosperity.