Microsoft (MSFT) Still a Buy
Shares of Microsoft (MSFT) are trading modestly lower today (continuing a pullback that began three weeks ago) after delivering Q4 fiscal 2024 results after the bell yesterday.
High level, revenue was 0.5% above expectations and EPS beat by a penny, but Azure growth was mildly below consensus (albeit still at the low end of management’s guidance). CapEx (which some see peaking soon) came in at $19 billion (+5 billion over last quarter) and was the largest sequential increase ever.
A subdued Q1 fiscal 2025 guide confirmed suspicions that this is a bit of a soft patch, at least relative to elevated expectations with all the euphoria around AI.
That said, soft patches are to be expected every now and then and Microsoft is still the clear leader in many of its markets, as well as AI. Management says Azure growth is expected to reaccelerate to the 28% to 29% range through fiscal 2025, with some commentary suggesting capacity limitations could ease.
That points toward CapEx spending. On that front, nearly all of ramping CapEx spend is going toward cloud and AI-related investments, half of which is targeted at building and leasing data centers to support monetization over a decade and a half.
In other words, the train has not left the station yet when it comes to making money off AI.
There are a lot of moving parts to a company this large, but stepping back it’s difficult to find serious issues that would make me want to avoid the stock. There will be some swings in share price to be sure, but I think those (like now) represent buying opportunities. BUY
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