Microsoft Corporation (NASDAQ:MSFT)’s shares are down by 4% over the past year and are up by 5% year-to-date. The year’s gains are due to a strong fourth-quarter earnings performance. Microsoft Corporation (NASDAQ:MSFT)’s stock closed 15.5% higher on July 30th as it reported its fiscal fourth quarter earnings on July 29th. The results saw the firm post $90 billion in revenue and $4.74 in earnings per share to beat analyst estimates of $87.62 billion and $4.24. Cramer, who had been wary about Microsoft Corporation (NASDAQ:MSFT) before the earnings, was impressed by the results:
“Just blown away by the Microsoft quarter. Tour de force. Didn’t see it coming because was worried about the trust’s oversized load position in it. Satya and Amy–incredible.. Just amazing… HOF”
Like other big tech players, Microsoft Corporation (NASDAQ:MSFT)’s cloud business is central to the debate between the bulls and the bears. During the latest quarter, the firm’s Intelligent Cloud business, which also includes its Azure cloud computing business, posted $39.31 billion in revenue to beat analyst estimates of $38.16 billion and mark a strong 31.6% annual growth. Specifically for Azure, Microsoft Corporation (NASDAQ:MSFT) outlined that growth sat at 43% to mark a three percentage point sequential growth. Additionally, the commercial returning performance obligations for Azure were $678 billion for an 8% sequential growth.
Microsoft Corporation (NASDAQ:MSFT)’s bulls use these figures to justify the firm’s massive capital expenditure. However, the bears point towards the impact of the capital expenditure on the firm’s free cash flow. During the quarter, Microsoft Corporation (NASDAQ:MSFT)’s free cash flow was $19.6 billlion which marked a 23% annual drop. However, the cash flow was still better than Meta’s $784 million. A major component of the debate is that the capital outlay is for depreciating assets. To address these, Microsoft Corporation (NASDAQ:MSFT) revealed during its earnings that it would extend the useful life estimates of its data centers to 25 years from the earlier 15 years. To sum it up, the debate surrounds whether Microsoft Corporation (NASDAQ:MSFT) can sufficiently monetize its products before its cash flow is impacted by its capital expenditures.
Shifting towards hedge funds, 312 out of the 1,041 hedge funds part of Insider Monkey’s Q4 2025 database had held a stake in Microsoft Corporation (NASDAQ:MSFT). This figure dropped to 282 out of 1,022 funds in Q1 2026. Fisher Asset Management was the largest stakeholder through its $9.6 billion stake, while Arrowstreet Capital‘s $8.9 billion stake marked a 65% annual jump. Short interest as a percentage of the float sat at 1.24%. Microsoft Corporation (NASDAQ:MSFT) is also part of our list of 10 Blue Chip Stocks Jim Cramer is Crazy About,
While Insider Monkey acknowledges 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 have limited downside risk. If you are looking for an AI stock that is more promising than MSFT that has 100x upside potential, check out our report about the cheapest AI stock.
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Disclosure: None.
