Why the bulls love Microsoft heading into 2025 … and beyond

Microsoft doesn't just look nice in neon lights; the company is an investor's dream come true thanks to its diversified business model.

Come for the diversification, stay for the growth potential

Microsoft isn’t a one-trick pony.

The tech giant has more than a few up its sleeve, in fact, which is exactly what makes it such a good-looking pick for your stock portfolio heading into whatever the next handful of years have in store.

Business doesn’t look the same as it did five years ago, but Microsoft, thanks to standout products like Office 365, is developing tools for what the future of business will look like.

What we do in our free time looks different, too … which is exactly why CEO Satya Nadella and Microsoft’s Xbox division acquired Activision-Blizzard for $68.7 billion in a deal that closed a little over a year ago.

Microsoft wants to be a part of your life — whether you want it to be or not.

Here are 10 reasons to be bullish on Microsoft (MSFT) moving forward:

Microsoft is a leader in AI and cloud computing

Microsoft's Azure platform continues to grow, positioning the company at the forefront of cloud computing and AI technologies. The integration of AI across its products, like Copilot, showcases its commitment to leading in these areas.

Copilot is just getting started, but already has more than a few intriguing use cases, like summarizing documents or writing emails. Here’s a rundown of some of Copilot’s tricks:

• Summarization

  Copilot can summarize documents, email threads, and chat content. For example, it can summarize an email thread to help users quickly understand the discussion. 

• Drafting

  Copilot can draft emails based on other emails or content that the user already has access to. 

• Data analysis

  Copilot can analyze data to identify trends, create visualizations, and make recommendations. 

• Meeting efficiency

  Copilot can help users be more engaged in meetings and catch up on meetings they missed. 

• Idea generation

  Copilot in Whiteboard can help users generate, categorize, and summarize ideas. 

• Note organization

  Copilot in OneNote can help users plan and organize their notes. 

• Video analysis

  Copilot in Microsoft Stream can help users get information from videos, including summaries, answers to questions, and calls to action. 

• Image creation

  Copilot can create images in Designer. 

• Synonyms

  Copilot can write synonyms to improve the ability of Q&A to understand user questions.

Microsoft has a diversified business model

Microsoft's revenue streams are not overly reliant on a single product. From Azure to Office 365, Xbox, and LinkedIn, this diversification acts as a buffer against sector-specific downturns, as seen with the resilience despite declines in Windows and Xbox sales.

Strong financial performance helps, too

Despite global tech challenges, Microsoft has shown robust revenue growth, with significant free cash flow, indicating not just growth but also profitability and financial health.

• Microsoft's free cash flow has grown significantly over the past five years, with a roughly 90% increase from 2019 to 2023, with 2019 seeing around $38 billion in free cash flow and 2023 reaching approximately $72 billion.

Microsoft has made strategic investments in AI

Microsoft's significant investment in OpenAI, even amidst regulatory scrutiny, underscores its strategic focus on AI, potentially leading to further innovations and market dominance in AI applications.

Market Valuation and Analyst Sentiment

Analysts have maintained a bullish outlook, with price targets suggesting significant upside potential, reflecting confidence in Microsoft's future earnings and market position.

Growth in enterprise software is good for Microsoft

The demand for enterprise software solutions, especially in cloud services and productivity tools like Microsoft 365, continues to grow, with Microsoft being a key player in this space.

With 365, Microsoft has essentially future-proofed its business.

Microsoft 365 encompasses a ton of productivity tools synonymous with offices and schools all over the world. The cloud-based productivity platform includes a variety of apps, features, and benefits, such as: 

• Apps

  Microsoft 365 includes the latest versions of productivity apps like Word, Excel, PowerPoint, Outlook, and OneNote. It also includes Microsoft Teams, Clipchamp, and Microsoft Editor. 

• Storage

  Microsoft 365 subscriptions include cloud storage for files, photos, videos, and emails. For example, Microsoft 365 Basic includes 100 GB of cloud storage, while Microsoft 365 Personal includes 1 TB. 

• Updates

  Microsoft 365 subscribers receive regular feature updates, security updates, and bug fixes. 

• Support

  Microsoft 365 subscribers receive ongoing tech support at no extra cost. 

• Family sharing

  The Microsoft 365 Family plan allows you to share your subscription with up to six people. 

• Security

  Windows Security, which includes Microsoft Defender Antivirus, is built into Windows PCs and automatically enabled. 

• Skype

  Microsoft 365 Personal subscribers receive 60 minutes of Skype calls per month. 

• Family safety

  For consumers, Microsoft 365 includes Family Safety, which allows you to set screen time limits on Windows and Xbox. 

Innovation in Software Development

Microsoft's tools for developers, like Visual Studio and Azure DevOps, continue to evolve, supporting a new generation of software development that's increasingly cloud-native and AI-driven.

Gaming sector expansion will boost Xbox

Beyond Xbox, Microsoft's acquisition of gaming studios and its push into cloud gaming through xCloud positions it well in the growing gaming market, which is seeing a shift towards subscription models.

Amazon didn’t buy Electronic Arts, but Microsoft pulled the trigger on Activision-Blizzard.

Here’s an updated list of the studios Microsoft owns:

• 343 Industries

• Alpha Dog Games

• Arkane Studios

• Beenox

• Bethesda Game Studios

• Bethesda Softworks

• Blizzard Entertainment

• Compulsion Games

• Demonware

• Digital Legends

• Double Fine Productions

• High Moon Studios

• id Software

• Infinity Ward

• Inxile Entertainment

• King

• MachineGames

• Mojang Studios

• Ninja Theory

• Obsidian Entertainment

• Playground Games

• Radical Entertainment

• Rare

• Raven Software

• Roundhouse Studios

• Sledgehammer Games

• Tango Gameworks

• The Coalition

• The Initiative

• Toys for Bob

• Treyarch

• Turn 10 Studios

• Undead Labs

• World's Edge

• Xbox Games Studios Publishing

• ZeniMax Online

At Microsoft, corporate leadership is top-notch

Under Nadella, Microsoft has transformed into a more agile, innovative company, focusing on cloud, AI, and enterprise solutions, which has historically been reflected in stock performance.

Global economic recovery and digital transformation

As businesses globally recover and continue their digital transformation, Microsoft's services are central to these strategies, potentially driving sustained growth in enterprise sales.

These reasons indicate Microsoft is well-positioned for growth due to its strategic focus on technology trends, financial stability, and market leadership in key areas of tech development. However, always remember that while these factors suggest a bullish outlook, market conditions can change, and it's wise to consider both the broader economic environment and specific company performance metrics for investment decisions.