With Microsoft‘s (NASDAQ:MSFT) cloud services business Azure gaining market share and many of the tech giant’s businesses benefiting greatly from the artificial intelligence (AI) boom and many businesses transitioning to the cloud, Microsoft stock remains very attractive. The company is also well-positioned to benefit from its forays into emerging markets and the very strong leadership of its CEO, Satya Nadella.
Given these points, I continue to recommend that investors looking for more exposure to large tech names buy Microsoft stock.
Impressive growth from the cloud and AI
Azure’s revenue soared 31% versus the same period a year earlier, easily outpacing the 17% year-over-year increase generated by Amazon‘s (NASDAQ:AMZN) cloud unit AWS last quarter.
As a result, it appears Azure is taking a meaningful market share in the cloud infrastructure market. Also importantly, the increase easily surpassed analysts’ average estimate of a 28% year-over-year (YoY) gain heading into the print.
Part of the unit’s success is due to the continued migration of business data to the cloud. Indeed, Nadella reported on Microsoft’s earnings call that the growth of Azure’s sales from cloud migrations is accelerating, and he named Dick’s Sporting Goods (NYSE:DKS) and the World Bank as two of the enterprises that are moving their data to the cloud with Azure’s assistance.
But Azure is also getting a big lift from the new AI tools, such as Sales Copilot, Service Copilot, GitHub Copilot and Security Copilot, that the unit is selling. These offerings are attractive to businesses because they increase employee productivity.
In fact, in a previous column, I noted that Jared Spataro,, Microsoft’s vice president of modern work and business applications, said “70% of Copilot users report that it’s making them more productive.”
Among the huge firms that have adopted the tech giant’s AI offerings are Moderna (NASDAQ:MRNA), Coca-Cola (NYSE:KO), Accenture (NYSE:ACN), and EY. And very impressively, “More than 65% of the Fortune 500 now use Azure OpenAI Service,” Nadella said. Further, the average amount spent by all of Azure’s customers on AI is continuously increasing, the CEO noted.
Looking to emerging market expansion
Spatoro noted that the firm would look to sell more licenses for its Microsoft 365 software to customers in emerging markets where it is laying the groundwork for a huge increase in its revenue.
For example, Microsoft plans to spend $2.2 billion in Malaysia between now and 2028 on improving the country’s cloud and AI infrastructure. And Microsoft is taking similar steps in Thailand, where it also plans to “train over 100,000 people in AI skills” and open a “data center region,” Seeking Alpha reported.
Over the long term, I believe that these investments in developing markets will pay huge dividends for Microsoft. That’s because they will enable the firm to sell its products to tens of thousands of new customers, including firms and government agencies within these countries.
Nadella’s decision to invest in these countries is an example of his visionary, forward-thinking. These same qualities enabled him to correctly see before many others that the cloud transformation and AI would produce huge booms that Microsoft could exploit to tremendously boost its top and bottom lines. Under Nadella’s leadership, I’m confident the firm will continue to effectively exploit large, new opportunities.
Consequently, I’m very bullish on the longer term outlook of Microsoft and MSFT stock.
The Street is upbeat on MSFT stock
Analysts are also very bullish on the shares. Of the 56 analysts issuing notes on the name in the last 90 days, 53 have a “buy” or a “strong buy” rating on it. And in the fourth quarter of last year, institutional investors bought 184.7 million shares of the name and sold only 114 million shares of it.
On the date of publication, Larry Ramer held a long position in MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.