Microsoft stock soared following its Q4 FY 2025 results, released after markets closed on 30 July, putting the company on course to break the $4 trillion market cap threshold.
The clamour to invest in Microsoft (NASDAQ:MSFT) has pushed its share price to unprecedented highs. Microsoft shares gained over 7% immediately after its earnings release, and continued to gain as the company’s earnings call took place.
“This quarter was music to the ears of Microsoft bulls as it exceeded Wall Street expectations, with significantly accelerated Azure growth,” said Dan Ives, global head of technology research at Wedbush Securities.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Get 6 issues free
Sign up to Money Morning
Don’t miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don’t miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
While not one of the top stocks among retail investors, Microsoft is a longstanding stock market giant, and now looks set to follow Nvidia into the $4 trillion club.
Of the ’Magnificent Seven’ stocks that currently dominate the S&P 500 and, with it, much of the global stock market, Microsoft is the oldest, having been founded in 1975 – one year before Apple.
Microsoft has had its share of ups and downs during that time. Microsoft stock gained over 460% in three years during the dotcom bubble of the late 1990s, but fell over 50% over the next three years as the bubble crashed.
But Microsoft has been at the forefront of various computing revolutions. PCs, the enterprise suite through Microsoft Office, and more recently cloud computing and artificial intelligence (AI) have seen it become a consistent leader in the global stock market and economy.
What is Microsoft Azure?
Microsoft Azure is Microsoft’s cloud computing platform. It is a direct competitor to Google’s GCP (standing for Google Cloud Platform) and Amazon’s AWS (Amazon Web Services).
These three companies dominate the cloud hosting market, holding a 63% market share between them. AWS is the largest incumbent, but with AI spending driving a boom in demand for cloud hosting services, there is space for Azure to grow extensively even if it just maintains its 22% share.
But the evidence suggests that Azure might be doing more than this, and could take market share away from AWS.
Azure revenue increased 39% in the year to June 2025, a figure that helped Microsoft’s stock soar towards $4 trillion after its earnings were announced.
Demand for AI is driving a surge of cloud revenue growth, as the developers of new AI models use cloud computing resources (referred to as ‘compute’ within the industry) in order to train and develop their new models.
How much is Microsoft spending on data centres?
One metric that would-be Microsoft investors should keep an eye on is its capital expenditure.
Microsoft expects to spend $30 billion on building out AI data centres in Q3 2025 alone. Those numbers would have worried the market a year or two ago. In the current climate, Microsoft has demonstrated that it can generate strong returns even on this level of investment.
“Microsoft is doubling down on the AI monetisation strategy within cloud,” said Ives. In other words, as long as it can keep monetising the demand for AI cloud services, the market may not mind how much Microsoft spends on building data centres.
Does Microsoft own OpenAI?
Microsoft is a major investor in OpenAI, the company behind ChatGPT, though it doesn’t own it.
It has rights to OpenAI’s IP, and also benefits from OpenAI’s demand for access to Azure – though OpenAI is reportedly exploring the possibility of ending its exclusive use of Azure in favour of other partners.
As well as access to OpenAI’s IP which includes ChatGPT, Microsoft also has its own AI assistant, Copilot. Microsoft’s CEO Satya Nadella revealed during the Q4 2025 earnings call that Copilot’s family of apps had surpassed 100 million monthly users.
Are Microsoft shares good value?
Despite being the world’s second-most valuable company, Microsoft stock isn’t wildly overpriced, at least not by the standards of big tech stocks.
As of close of regular trading on 30 July, Microsoft’s stock was priced at 37.6 times trailing earnings and 33.6 times projected earnings. That made Microsoft stock cheaper than shares in Nvidia or Amazon – though these figures predate the after-hours surge that accompanied Microsoft’s earnings release.
Given Microsoft’s mix of AI exposure, revenue visibility, impressive margins and healthy cash flows, Matt Britzman, senior equity analyst at Hargreaves Lansdown, says that “investors don’t need to look much further for an AI name to buy and hold”.
Similarly, Lale Akoner, global market analyst at eToro, says “if you’re looking for a stable, long-term way to ride the AI wave, [Microsoft] is still one of the best bets out there”.
