Is MSFT a good stock to buy? We came across a bullish thesis on Microsoft Corporation on Compounding Your Wealth’s Substack by Sergey. In this article, we will summarize the bulls’ thesis on MSFT. Microsoft Corporation’s share was trading at $411.22 as of April 15th. MSFT’s trailing and forward P/E were 24.60 and 20.45 respectively according to Yahoo Finance.
Microsoft Corporation develops and supports software, services, devices, and solutions worldwide. MSFT reported strong Q2 FY2026 results, with revenue of $81.3B (+17% YoY) and EPS growth of 24%, driven primarily by continued strength across its cloud and AI ecosystem. Cloud revenue exceeded $51.5B (+26%), with Azure growing 39%, underscoring accelerating enterprise migration and AI-driven workload expansion.
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Operating margins expanded to 47%, reflecting strong operating leverage, although gross margins declined to 68% due to elevated AI infrastructure costs. Capital expenditure surged to $37.5B, highlighting aggressive investment in data center capacity and AI compute infrastructure, even as near-term returns remain partially constrained by supply limitations.
A key structural advantage lies in Microsoft’s integrated platform, where cybersecurity, identity, cloud, and productivity tools are bundled into a unified ecosystem, creating high switching costs and reinforcing enterprise lock-in. The cybersecurity business is deeply embedded rather than standalone, serving 1.6M customers, with over 1M using multiple workloads, reflecting strong cross-sell dynamics. AI integration is increasingly central, with Security Copilot and Purview processing 24B AI interactions (+9x YoY), positioning security as an intelligent control layer across the stack.
AI demand remains the primary growth driver but also a constraint, as Azure capacity is currently unable to fully meet demand. Monetization is expanding across both infrastructure and applications, including Copilot products with 15M paid seats, reinforcing early traction in enterprise AI adoption. However, rising capital intensity is a key pressure point, with CapEx growing faster than revenue, and concentration risk persists with ~45% of RPO tied to OpenAI.
Microsoft remains exceptionally well positioned, with Azure expected to grow 37–38% and long-term performance driven by sustained AI monetization, expanding margins at scale, and continued reinforcement of its enterprise ecosystem moat.
Previously, we covered a bullish thesis on Microsoft Corporation (MSFT) by Ray Myers in May 2025, which highlighted enterprise productivity dominance, Azure-driven cloud expansion, gaming ecosystem strength, and AI integration. MSFT’s stock price has depreciated by approximately 9.24% since our coverage. Sergey shares a similar view but emphasizes Q2 FY2026 results and AI-driven cloud demand acceleration, while focusing more on margin expansion and capacity constraints in Azure.
Microsoft Corporation is on our list of the 40 Most Popular Stocks Among Hedge Funds. As per our database, 312 hedge fund portfolios held MSFT at the end of the fourth quarter which was 312 in the previous quarter. While we acknowledge the risk and potential of MSFT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MSFT and that has 10,000% upside potential, check out our report about this cheapest AI stock.
Disclosure: None.
