In this article, we will take a look at the 15 Best Wide Moat Dividend Stocks to Invest in.
Wide-moat stocks are companies with durable advantages that help them keep competitors at bay. According to an S&P Global report, a large market share can be a sign of a strong economic moat. In simple terms, this means the company controls a sizable portion of sales in its industry or market. That edge can come from scale, network effects, or strong brands. Still, market share alone doesn’t tell the full story. A dominant position doesn’t always lead to strong profits or a lasting competitive edge, so it needs to be weighed alongside other factors.
Companies with truly sustainable advantages usually show a clear quality bias. This shows up in stronger risk-adjusted returns and more defensive performance. The report looked at back-tested results for the S&P 500 Economic Moat Index, starting from June 28, 2013. From then through May 2024, companies with the widest moats outperformed the broader market, both in raw returns and after adjusting for risk.
Over that full period, the index delivered a risk-adjusted return of 1.10, compared with 0.91 for the S&P 500. It also experienced smaller drawdowns, reinforcing its defensive nature. That result makes sense, as wide-moat companies are typically higher-quality businesses that are better equipped to handle market stress and uncertainty.
Looking back, the index has also shown it can help smooth out volatility in most high-volatility periods. While it lagged by an average of 28 bps when the VIX was above 30, it outperformed by an average of 57 bps when the VIX ranged between 25 and 30, and by 72 bps when the VIX was between 20 and 25.
Given this, we will take a look at some of the best wide moat stocks to invest in.
Our Methodology:
To select wide-moat dividend stocks, we identified companies with durable competitive advantages and a strong history of rewarding shareholders. These advantages included brand strength, cost leadership, network effects, regulatory barriers, and high switching costs, all of which help protect a company from competition. We also considered holdings of VanEck Morningstar Wide Moat ETF, which tracks the performance of companies with sustainable competitive advantages according to Morningstar’s equity research team. Finally, we picked 15 companies that were most popular among hedge funds, as per Insider Monkey’s database of Q3 2025.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
15. The Clorox Company (NYSE:CLX)
Number of Hedge Fund Holders: 37
On February 4, BofA analyst Anna Lizzul raised the firm’s price target on The Clorox Company (NYSE:CLX) to $112 from $110 and kept a Neutral rating on the stock. The move followed the company’s fiscal Q2 results, where adjusted EPS came in below the firm’s estimate after gross margins fell short due to higher costs. Looking to the second half of the year, the firm said it continues to hold “more tepid forecasts.” Lizzul pointed to uncertainty around whether consumption trends and margins will meaningfully improve.
Clorox missed market expectations for second-quarter profit on February 3. Shoppers have been trading down to cheaper alternatives as inflation continues to pressure household budgets. This shift has weighed on demand for branded cleaning products. It’s the kind of behavior many people notice firsthand in grocery stores, where private-label products are taking up more shelf space.
Budget-conscious consumers pulled back on purchases of floor cleaners and disinfecting sprays. That pressure showed up clearly in the Household segment, Clorox’s second-largest by revenue. The unit, which includes bags, wraps, and cat litter, reported a 54% drop in adjusted EBIT for the quarter. Higher manufacturing and logistics costs, along with lower net sales, drove the decline.
At the same time, the company has been pushing into new categories. The maker of Pine-Sol recently entered the ready-to-eat market with protein-focused snacks such as Hidden Valley Ranch Dippers & Toppers. Clorox is also moving forward with its $2.25 billion acquisition of GOJO Industries, the maker of Purell, to strengthen its presence in health and hygiene.
On an adjusted basis, Clorox earned $1.39 per share during the quarter, compared with estimates of $1.43, according to LSEG data. Revenue fell 1% year over year to $1.67 billion. Analysts had expected a steeper decline of 2.7% to $1.64 billion.
Management reaffirmed its full-year outlook, projecting a 6% to 10% drop in net sales and adjusted EPS in the range of $5.95 to $6.30. The company said earlier order fulfillment challenges, which hurt consumption and market share, are keeping expectations toward the lower end of that range.
The Clorox Company (NYSE:CLX) operates as a multinational manufacturer and marketer of consumer and professional products. Its business is organized into four segments: Health and Wellness, Household, Lifestyle, and International.
14. The Hershey Company (NYSE:HSY)
Number of Hedge Fund Holders: 46
On January 29, Deutsche Bank raised its price recommendation on The Hershey Company (NYSE:HSY) to $188 from $180. However, it reiterated a Hold rating on the stock ahead of the Q4 earnings report.
Earlier in the month, on January 15, the Wall Street Journal reported that the company had boosted its marketing budget for its Hershey’s brand by 20%. The increase supports the brand’s first new advertising campaign in eight years. Hershey spent about $600 million on advertising in 2024.
The campaign will run across traditional television and streaming platforms. It will also expand into areas where the brand has had less exposure. That includes influencer marketing on TikTok, live events, and promotions tied to major cultural moments, such as this year’s Winter Olympics and the America250 celebrations. The rollout is scheduled to begin next week.
Hershey said stronger performance at Hershey’s would benefit the broader company. Management views the brand as a core driver, and higher sales there tend to lift overall results. It’s the kind of focus large consumer companies often return to when growth slows, leaning on their most recognizable names.
The Hershey Company (NYSE:HSY) operates as a global snacks company with three main segments: North America Confectionery, North America Salty Snacks, and International.
13. Mondelez International, Inc. (NASDAQ:MDLZ)
Number of Hedge Fund Holders: 50
On February 4, TD Cowen lifted its price target on Mondelez International, Inc. (NASDAQ:MDLZ) to $65 from $62 and maintained a Buy rating. The firm noted that management’s early outlook for 2026 came in below consensus, with organic growth projected at 0%–2%. That range reflects the risk that competitors could cut chocolate prices before Mondelez does, along with ongoing volume weakness in North America.
A Reuters report published a day earlier painted a similar picture. Mondelez is bracing for a slower year as repeated price hikes begin to push budget-conscious shoppers away at a time when living costs remain elevated, and economic uncertainty is still top of mind. In the US, especially, consumers are pulling back, gravitating toward cheaper channels and buying fewer items after multiple rounds of increases meant to offset soaring cocoa costs.
Cocoa prices jumped roughly 160% in 2024 before easing more recently due to a global surplus. Even so, the company has already locked in cocoa supply for 2026 at prices above today’s market levels, limiting its flexibility to roll back pricing in the near term.
CEO Dirk Van de Put said US consumer confidence remains fragile, with shoppers trading down and higher-income customers shifting toward so-called better-for-you snacks, particularly protein-focused options. He added that Europe is still on shaky footing, although chocolate volumes there are expected to steady after last year’s round of price increases.
Looking ahead, Mondelez expects organic net revenue growth in 2026 to range from flat to 2%, below the 3.84% increase analysts had been forecasting. Adjusted profit growth is projected at 0%–5%, compared with expectations of about 8.3%, according to LSEG data.
Mondelez International, Inc. (NASDAQ:MDLZ) operates as a global snack maker, with its core business centered on chocolate, biscuits, and baked snack products.
12. U.S. Bancorp (NYSE:USB)
Number of Hedge Fund Holders: 56
On February 4, UBS lifted its price recommendation on U.S. Bancorp (NYSE:USB) to $60 from $57. The firm maintained a Neutral rating on the stock. The move reflects modest confidence, not a major shift in stance. For investors who track large regional banks closely, this kind of incremental adjustment is familiar territory.
A few weeks earlier, on January 13, U.S. Bancorp announced plans to acquire BTIG for up to $1 billion in cash and stock. The purchase brings in a long-time partner and gives the bank a clearer path into capital markets, an area it has been steadily building out beyond traditional banking.
The deal is designed to tap into BTIG’s strengths across investment banking, institutional sales and trading, research, and prime brokerage. U.S. Bancorp has worked with BTIG since 2014, when the brokerage became its equity capital markets referral partner. This is not a cold start. It looks more like formalizing a relationship that has already been tested over time.
Under the agreement, U.S. Bancorp (NYSE:USB) will pay $725 million in cash and stock upfront. An additional $275 million in cash may be paid over the next three years, depending on performance targets. If those targets are met, the acquisition would add roughly $750 million in annual revenue, largely fee-based, which matters as banks look for income streams less tied to interest rates.
The transaction also expands the bank’s capabilities in equity capital markets, mergers and acquisitions advisory, and equity trading. BTIG’s leadership team will join U.S. Bancorp and continue running the business, which should help preserve client relationships and internal culture. BTIG, Goldman Sachs, and Sheumack GMA served as advisers on the deal. The acquisition is expected to close in the second quarter of 2026.
U.S. Bancorp (NYSE:USB) operates across Wealth, Corporate, Commercial and Institutional Banking, Consumer and Business Banking, Payment Services, and Treasury and Corporate Support.
11. Colgate-Palmolive Company (NYSE:CL)
Number of Hedge Fund Holders: 56
On February 3, Barclays analyst Lauren Lieberman raised the price recommendation on Colgate-Palmolive Company (NYSE:CL) to $88 from $83. The firm kept an Equal Weight rating. The analyst said in the research note that growth in 2026 should look better than 2025, but the company likely won’t get the same lift from inflation-driven pricing in emerging markets that it has relied on for years.
That view lines up with what the company shared a few days earlier. On January 30, Colgate forecast full-year sales above Wall Street expectations. Demand for everyday household products has stayed steady, especially in Latin America and Europe, where consumers have been more resilient than in North America.
Across the consumer staples space, companies have slowed price increases and leaned more on marketing to bring shoppers back. Price sensitivity is still an issue in North America. Even so, Colgate has held its ground. Toothpaste, manual toothbrushes, and household cleaning products continue to sell, even after price hikes. That steady demand has helped protect margins and absorb higher tariffs and raw material costs. This is often how staples companies quietly outperform. They don’t need big volume growth to make the numbers work.
Hill’s Pet Nutrition also showed improvement during the quarter. The segment bounced back after a weak third quarter that followed the company’s exit from private-label pet food. In the fourth quarter, prices rose 2.7%, while volumes were flat year over year. North America organic sales fell 1.8%, driven by a 2.3% decline in volumes, partly offset by a 0.5% increase in pricing.
For the quarter ended December 31, net sales reached $5.23 billion, ahead of the $5.12 billion consensus estimate from LSEG. Adjusted earnings came in at 95 cents per share, above expectations of 91 cents. Looking ahead, Colgate expects 2026 net sales growth of 2% to 6%, including the impact of tariffs announced as of January 28 by all countries. The midpoint of that range sits above analysts’ expectations of 3.5%.
Colgate-Palmolive Company (NYSE:CL) continues to frame itself as a growth company, focused on Oral Care, Personal Care, Home Care, and Pet Nutrition.
10. Medtronic plc (NYSE:MDT)
Number of Hedge Fund Holders: 58
On February 4, UBS raised its price recommendation on Medtronic plc (NYSE:MDT) to $104 from $103. The firm kept a Neutral rating on the stock.
A day earlier, Medtronic announced plans to acquire privately held CathWorks in a deal valued at up to $585 million. The move is aimed at strengthening its heart devices portfolio by adding a diagnostic tool that could improve how doctors assess coronary artery disease.
The acquisition gives Medtronic access to the CathWorks FFRangio System. The technology evaluates coronary artery disease without invasive procedures. This condition remains the most common heart issue, caused by plaque buildup that restricts blood flow to the heart muscle. For clinicians, tools like this can change how decisions get made in real time.
Heart devices already make up close to 40% of Medtronic’s total revenue. That includes pacemakers and its fast-growing Pulsed Field Ablation business. Adding a new diagnostic capability fits naturally into that mix, especially as treatment becomes more data-driven.
The company said the deal builds on a strategic partnership formed with CathWorks in 2022. This was not a sudden pivot. It looks more like the next step after working together and seeing what the technology can do in practice. The transaction still requires clearance from the U.S. Federal Trade Commission. Medtronic expects the deal to close by the end of its fiscal 2026.
Medtronic plc (NYSE:MDT) is based in Ireland and focuses on healthcare technology solutions.
9. Amgen Inc. (NASDAQ:AMGN)
Number of Hedge Fund Holders: 62
On February 4, RBC Capital raised its price recommendation on Amgen Inc. (NASDAQ:AMGN) to $360 from $335. The firm also kept an Outperform rating and pointed to a strong fourth quarter on both revenue and earnings. According to the research note, the upside was largely driven by Prolia, Repatha, Evenity, and Uplizna. On MariTide, Amgen did not provide new details on part II of the recently reported trial, but management reiterated that there are multiple ways to win in obesity.
A day earlier, on February 3, Amgen reported fourth-quarter results that exceeded Wall Street expectations. Shares moved modestly higher after the release, supported by continued confidence in its experimental weight-loss drug MariTide.
Quarterly revenue rose 9% year over year to $9.9 billion, topping the $9.5 billion consensus estimate from LSEG. Adjusted earnings per share came in at $5.29, roughly flat compared with last year but well ahead of expectations of $4.73. That gap stood out, especially in a quarter where pricing pressure remained visible. Amgen is currently running six Phase 3 trials for MariTide across obesity and related conditions, including heart disease and sleep apnea. The company also plans to begin Phase 3 studies in diabetes patients later this year. Alongside that effort, Amgen is enrolling obese adults in a Phase 1 trial for another weight-loss candidate, AMG513. The pipeline remains busy, and management continues to signal long-term commitment to this space.
Looking ahead to 2026, Amgen expects adjusted earnings per share between $21.60 and $23.00. Wall Street currently estimates $22.09. The company also forecast full-year revenue of $37 billion to $38.4 billion, compared with analysts’ expectations of $37.1 billion.
In the fourth quarter, product sales volumes rose 10%, while net prices declined 4%. That mix resulted in 7% quarter-over-quarter growth, a reminder of how much volume continues to matter as pricing headwinds persist.
Amgen Inc. (NASDAQ:AMGN) develops, manufactures, and delivers medicines aimed at some of the most challenging diseases. Its strategy remains centered on areas of high unmet medical need, with a pipeline designed to support growth beyond its established products.
8. PepsiCo, Inc. (NASDAQ:PEP)
Number of Hedge Fund Holders: 68
On February 4, UBS analyst Peter Grom raised his price recommendation on PepsiCo, Inc. (NASDAQ:PEP) to $190 from $170. The analyst also reiterated a Buy rating on the stock. The call followed a solid fourth quarter, helped by better organic sales growth and steady profit delivery. Management also reiterated its 2026 outlook, which gave investors something familiar to anchor to.
A day earlier, the company acknowledged a shift in pricing. According to Reuters, PepsiCo plans to cut prices on core snack brands like Lay’s and Doritos by as much as 15%. The move comes after consumer pushback to several rounds of price hikes. PepsiCo confirmed the plan on February 3, shortly after topping fourth-quarter expectations.
This is happening as packaged food companies face a tougher consumer backdrop. The growing use of appetite-suppressing weight-loss drugs is changing how people think about snacks and soda. Brands are being pushed to rethink not just what they sell, but how they sell it. For PepsiCo, portion control has become a key lever. CEO Ramon Laguarta said more than 70% of the company’s US food portfolio now comes in single-serve sizes. That reflects how many consumers want smaller, more controlled purchases rather than full-size packs.
The company is also refreshing major brands like Quaker, Gatorade, Lay’s, and Tostitos. The focus is shifting toward lower sugar options and fewer artificial ingredients, especially to appeal to younger households with children. It’s a gradual adjustment, not a sharp pivot.
At the same time, PepsiCo was clear about the pressure on budgets. Affordability remains “the biggest cause for friction” for low- and middle-income consumers when it comes to snack spending. Management expects these targeted, or “surgical,” price cuts to help North America snacks return to volume growth this year.
PepsiCo, Inc. (NASDAQ:PEP) operates across beverages, food, and snacks, with major segments spanning North America and international markets. The current approach shows a company listening more closely to consumers and adjusting where it needs to, even if that means stepping back on pricing to protect volumes.
7. The Coca-Cola Company (NYSE:KO)
Number of Hedge Fund Holders: 78
Deutsche Bank lifted its price recommendation on The Coca-Cola Company (NYSE:KO) to $83 from $82 on January 29. The firm also reaffirmed its Buy rating on the stock ahead of the company’s fourth-quarter earnings report.
Coca-Cola has built a business with truly global reach, selling beverages that tend to hold up well no matter what the economy looks like. Whether growth is strong or consumers are feeling the pinch, people continue to reach for familiar Coca-Cola brands. Importantly, the company hasn’t stood still. It has steadily reshaped its beverage lineup to match changing tastes, expanding into areas like plant-based drinks, zero-sugar offerings, alcoholic beverages, and other adjacent categories. By making sure there is something for virtually every type of consumer, Coca-Cola has managed to protect its leadership position even as preferences evolve.
That resilient model throws off significant cash, which supports one of the most reliable dividend records in the market. Coca-Cola returned $8.4 billion to shareholders through dividends in 2024 alone and has paid out close to $100 billion in dividends since January 2010. With a steadily rising payout and a yield of more than 2.6% in early 2026, the stock continues to stand out for investors looking for dependable and growing income.
The Coca-Cola Company (NYSE:KO) operates across multiple regions, including Europe, the Middle East and Africa, Latin America, North America, Asia Pacific, as well as its Global Ventures and Bottling Investments segments.
6. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Holders: 88
On February 3, Mizuho lifted its price target on Costco Wholesale Corporation (NASDAQ:COST) to $1,065 from $1,000 and kept its Outperform rating in place. The firm expects the stock to keep finding support through the year as membership growth picks back up and the pace of consumer spending cools to more normal levels.
Costco’s long-term performance shows why investors tend to stay patient with the name. Over the past five years, the shares have been up more than 177%, far ahead of the S&P 500’s roughly 80% gain. That outperformance hasn’t come from flashy moves, but from a consistent, methodical strategy that has held up well across different economic environments.
The retailer’s appeal goes beyond numbers. Costco is one of the few stores that inspires near-fanatical loyalty, with shoppers lining up for bulk bargains and staples like its famously cheap hot-dog combo. Its massive scale gives it buying power that few rivals can match, allowing it to keep prices low. Importantly, the real engine of the business isn’t merchandise margins, but the steady stream of cash from membership fees, which provides a reliable and recurring source of profit.
On dividends, Costco has quietly built an impressive record, raising its payout for 20 consecutive years. The yield may look modest at around 0.5%, but the company only uses about a quarter of its earnings to fund the dividend, leaving plenty of room to grow over time. On top of that, Costco has occasionally paid special dividends, which long-term shareholders have welcomed as a bonus.
Costco Wholesale Corporation (NASDAQ:COST) runs a global network of membership warehouses and online platforms, selling a mix of well-known brands and its own private-label products across a broad range of everyday categories.
5. Applied Materials, Inc. (NASDAQ:AMAT)
Number of Hedge Fund Holders: 89
On February 4, Citi analyst Atif Malik raised his price target on Applied Materials, Inc. (NASDAQ:AMAT) to $400 from $250 and reiterated a Buy rating ahead of the company’s January-quarter earnings report scheduled for February 12. Citi is looking for results to come in above consensus, pointing to upward spending revisions across major foundry and memory chipmakers.
The stock’s move over the past year supports that view. Shares are up more than 66%, a reflection of strong demand for chipmaking equipment tied to the rapid buildout of AI-focused semiconductors. AI workloads require more advanced chips, and those chips need increasingly complex manufacturing tools. Applied Materials operates with a relatively stable growth model. New fabrication plants and capacity expansions take years to plan and execute. Once equipment is installed, it doesn’t stop generating value. Ongoing service, upgrades, and maintenance create recurring revenue streams that add visibility to earnings.
That structure positions the company well as chip manufacturing continues to expand globally. Demand is being driven not just by AI, but also by electric vehicles, network-connected industrial equipment, and broader digitization across industries. These trends tend to move slowly, but they last.
Financially, Applied Materials continues to execute. The company posts strong operating margins and returns its free cash flow to shareholders through dividends and share repurchases, keeping capital allocation straightforward and shareholder-focused.
Applied Materials, Inc. (NASDAQ:AMAT) provides materials engineering solutions, supplying equipment, services, and software to the semiconductor, display, and related technology industries.
4. Merck & Co., Inc. (NYSE:MRK)
Number of Hedge Fund Holders: 92
On February 4, Scotiabank raised its price target on Merck & Co., Inc. (NYSE:MRK) to $136 from $120 and maintained an Outperform rating. The firm said the higher target reflects multiple expansion, noting that Merck’s execution continues to run ahead of its expectations.
That upgrade came shortly after Merck issued a softer outlook for 2026. On February 3, the company said both sales and profits next year are likely to fall below Wall Street estimates. Management pointed to the upcoming loss of exclusivity for its diabetes drug Januvia and other older products, saying the impact could be larger than analysts currently expect.
The cautious forecast overshadowed what was otherwise a strong fourth quarter. Merck beat both revenue and earnings expectations, driven by continued demand for its cancer immunotherapy Keytruda. Still, the longer-term picture drew more attention. The company expects 2026 revenue to range from $65.5 billion to $67.0 billion, with even the high end coming in below the $67.6 billion consensus estimate, according to LSEG. Merck also flagged about $2.5 billion in pressure this year from a mix of factors. That includes rising generic competition, Medicare price negotiations, and weaker sales of its COVID-19 treatment, Lagevrio, CEO Rob Davis said in an interview.
Davis added that several drugs could underperform expectations, including Januvia, related therapies Janumet and Janumet XR, and Bridion, which is used to reverse the effects of muscle relaxants. While some of these products are weighing on near-term results, management has been clear about where it wants investors to look next, emphasizing longer-term growth drivers across the broader portfolio.
Merck & Co., Inc. (NYSE:MRK) is a global healthcare company focused on prescription medicines, spanning biologic therapies, vaccines, and animal health products, with its pharmaceutical business centered on human health drugs and vaccines.
3. Union Pacific Corporation (NYSE:UNP)
Number of Hedge Fund Holders: 99
On February 4, Union Pacific Corporation (NYSE:UNP) and Wabtec reached a $1.2 billion agreement to overhaul Union Pacific’s AC4400 locomotive fleet. The companies called it “the largest locomotive modernization investment in rail industry history,” with deliveries slated to begin in 2027.
The timing reflects a broader shift across US railroads. With infrastructure funding flowing in, operators are moving to refresh aging fleets, swapping older engines for more fuel-efficient, digitally enabled locomotives. It’s a practical upgrade cycle, driven as much by cost control as by performance.
Union Pacific expects tangible gains from the program. The modernized locomotives should cut fuel consumption by more than 5%, lift tractive effort by 14%, and improve reliability by about 80%. Once the work is complete, the railroad will have more than 1,700 upgraded units in service. This is its fourth modernization agreement with Wabtec, a sign that the partnership is well established.
From a market perspective, the news follows a more cautious note from JPMorgan. On January 28, the firm trimmed its price target on Union Pacific to $265 from $270 and kept a Neutral rating.
Union Pacific Corporation (NYSE:UNP) runs one of the largest rail networks in the country, spanning more than 23 states across the western two-thirds of the US. Its network plays a central role in moving goods through the domestic and global supply chain.
2. Johnson & Johnson (NYSE:JNJ)
Number of Hedge Fund Holders: 103
On February 3, RBC Capital raised its price target on Johnson & Johnson (NYSE:JNJ) to $255 from $240 and reiterated an Outperform rating. The firm said the company is unlikely to reverse the core implications of the Daubert ruling. Even so, the analyst noted that the litigation could stretch on for years, handled case by case and year by year. RBC added that Johnson & Johnson’s strong balance sheet and improving operating trends give it room to manage those risks.
The view comes after Johnson & Johnson reported full-year results for 2025 last month. It was another steady year. Revenue rose 6% to $94.2 billion, in line with what investors have grown accustomed to from the company. Growth was slower in 2024, at about 4%, but single-digit increases have long been the norm for a business of this size. Lately, the tone from management has been more confident. CEO Joaquin Duato said the company sees a clearer path to faster expansion, noting, “We have line of sight to double-digit growth by the end of the decade.”
Oncology sits at the center of that plan. Johnson & Johnson wants to become the world’s leading cancer drugmaker and is targeting $50 billion in oncology revenue over time. That would be roughly double what the segment generated in the most recent year.
Looking ahead, management is projecting 2026 revenue of $100.5 billion, which implies growth of around 6.7%. The trend in the top line suggests momentum is building, something growth-oriented investors tend to watch closely.
Johnson & Johnson (NYSE:JNJ) operates across healthcare through its Innovative Medicine and MedTech segments, developing and selling a wide range of pharmaceutical and medical technology products.
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 312
On January 29, TD Cowen trimmed its price recommendation on Microsoft Corporation (NASDAQ:MSFT) to $610 from $625. It kept a Buy rating on the stock. The firm pointed to softer Azure growth, though guidance held up. Demand continues to exceed supply, forcing Microsoft to carefully manage capacity across first-party inference, internal R&D, and Azure services.
The latest quarter showed why expectations remain high. Microsoft posted $81.3 billion in revenue, up 17% year over year and nearly $1 billion ahead of forecasts. Earnings per share came in at $4.14, up 24% and $0.22 above estimates. Net income stood out, jumping 60% to $38.5 billion.
Margins dipped slightly as spending increased, but cash generation remains strong. Xbox Content and Services was the only segment to post a decline, down 5% for the quarter. One number that keeps coming up in conversations is backlog. Microsoft now has $625 billion in future contracted revenue. That figure usually signals strength, but there is a wrinkle. About $281 billion of that backlog is tied to OpenAI. Cloud services are not like digital platforms, where capacity scales easily. Every new Azure customer requires real infrastructure, real power, and real space.
Right now, Microsoft is running into limits. Demand is ahead of available capacity, which helps explain the large backlog. It is a good problem in one sense, though it does place a ceiling on how fast Azure can grow in the near term. Even so, Azure revenue still rose 39% in the quarter. Growth may cool from here, but at Microsoft’s scale, that pace remains meaningful.
Microsoft Corporation (NASDAQ:MSFT) develops and supports software, services, devices, and technology solutions across enterprise, consumer, and cloud markets.
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