One of the most encouraging recent developments is that the evidence is showing the investment rationale behind the AI spending boom is starting to look a lot less theoretical. For instance, Microsoft Corp. (MSFT) delivered a blowout fiscal Q4, writes Tyler Laundon, editor of Cabot Early Opportunities.
Along with several other AI infrastructure names, Microsoft showed that massive investments in data centers, cloud capacity, power, networking, and compute are translating into real revenue, backlog growth, margin strength, and cash flow. This isn’t all to say that we should throw caution aside and buy any stock that moves higher. But fantastic earnings results are pushing the market higher.
Microsoft Corp. (MSFT)
Microsoft is clearly one of the best-positioned AI companies in the market. Revenue was $90 billion (+17.8%), adjusted earnings per share were $4.74 (+30%), and EPS beat expectations by 12%.
Azure cloud revenue growth accelerated to 43% in constant currency, beating expectations for roughly 40% growth. Management guided to Q1 FY27 Azure growth of around 45%.
AI monetization is also becoming more tangible, with Microsoft 365 Copilot now above 30 million paid seats, up from about 20 million last quarter. GitHub Copilot revenue grew 60% sequentially. Despite massive AI investment, Q4 operating margin was 45.1%, and guidance calls for double-digit revenue and operating income growth along with stable margins.
Recommended Action: Buy MSFT.
