Microsoft ( NASDAQ:MSFT ) has a strong track record of generating top-line growth, and despite the challenging economic climate, the company has managed to post reasonably constant profit margins. Additionally, Microsoft stock has a long growth runway given its capacity to take advantage of business prospects in the AI sector. With this latest article, I give a Buy recommendation for Microsoft stock.
What Investors Need to Know About Microsoft Stock
Microsoft is the top software firm in the world and is known for its operating systems and office productivity tools. The Azure and Xbox divisions of Microsoft are also among the market leaders in the global markets for console games and cloud computing, respectively. These are Microsoft’s fundamentals.
When evaluating any stock as a potential investment, the 80/20 rule or Pareto Principle is taken into consideration. Investors should actually concentrate on a few elements that have a disproportionate impact on a company’s business prospects.
Profit margins, predictability of revenue, and artificial intelligence are the three main aspects of Microsoft stock that, in my opinion, investors should be aware of.
In the next paragraphs of the post, I will go into more detail about the aforementioned points.
Profits & Margins
Despite a modest -0.8% sales miss in the most recent quarter, Microsoft managed to post a slight +0.3% earnings beat for the Q2 FY 2023 (YE June) financial period. Microsoft’s Q2 FY 2023 bottom line exceeded expectations in large part due to higher profit margins than anticipated.
According to S&P Capital IQ data, Microsoft’s Q2 FY 2023 non-GAAP adjusted operating profit margin was 40.9%, which was +120 basis points better than the consensus operating margin expectation of Wall Street analysts, which was 39.7%.
Microsoft stated that its actual non-GAAP adjusted operating costs...
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