Shares of Microsoft Corporation (MSFT) have surged 32.1% year-to-date, closing its last trading session at $316.48. The tech behemoth’s robust growth can be attributed to its active engagement in numerous collaborations, contributing to both its current expansion and enhancing prospects.

For instance, on July 26, MSFT and PayPal Holdings, Inc. (PYPL) announced their partnership, integrating PYPL's Pay Later solution across multiple nations. These integrations anticipate furnishing adaptable payment options, nurturing customer allegiance, and potentially augmenting MSFT's sales and customer contentment.

Moreover, on July 11, MSFT and KPMG disclosed a substantial expansion of their global affiliation, set to restructure professional services in crucial business domains. This entails workforce modernization, secure development, and utilization of Artificial Intelligence (AI) solutions for clients, industries, and society at large.

The partnership encompasses KPMG a multibillion-dollar commitment to Microsoft Cloud and AI services over the ensuing five years. This commitment has the potential to unlock over $12 billion in incremental growth for KPMG. Such substantial partnerships should prove advantageous for MSFT’s growth and reputation.

Also, on June 29, MSFT and Moody’s Corporation (MCO) joined forces to offer advanced data, analytics, research, and risk solutions to financial services and global knowledge workers.

By amalgamating MCO's insights with Microsoft Cloud services like Azure OpenAI Service, Fabric, and Teams, MSFT aspires to furnish cutting-edge solutions for enhanced business intelligence. This endeavor might stimulate customer adoption and revenue expansion, enhancing MSFT's market stance.

Here is what could shape MSFT’s performance in the near term:

Robust Financials

During the fiscal 2023 fourth quarter that ended June 30, MSFT’s gross margin increased 11.2% year-over-year to $39.39 billion. Its operating income rose 18.1% from the year-ago value to $24.25 billion. Moreover, the company’s net income and EPS grew 20% and 20.6% year-over-year to $20.08 billion and $2.69, respectively.

Positive Analyst Estimates

Analysts expect MSFT’s revenue to increase 11.1% year-over-year to $235.51 billion for the fiscal year ending June 2024. The company’s EPS for the current year is expected to rise 12.2% year-over-year to $11.01. Moreover, the company surpassed the consensus EPS estimates in all four trailing quarters, which is impressive.

Furthermore, MSFT’s revenue and EPS for the next fiscal year (ending June 2025) are expected to grow 13.2% and 15% year-over-year to $266.61 billion and $12.66, respectively.

High Profitability

MSFT’s trailing-12-month gross profit margin of 68.92% is 43% higher than the 48.20% industry average. Its trailing-12-month EBITDA margin of 48.14% is 437.6% higher than the industry average of 8.96%. In addition, the stock’s trailing-12-month net income margin of 34.15% compares to the industry average of 2.01%.

Robust Historical Growth

Over the past three years, the company’s revenue grew at a CAGR of 14%. Its EBITDA and net income grew at respective CAGRs of 16.1% and 17.8%. Also, the company’s EPS and total assets increased at CAGRs of 18.9% and 11%, respectively, during the same time frame.

POWR Ratings Show Promise

MSFT’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. MSFT has a B grade for Stability, in sync with its 60-month beta of 0.90. The stock also has a B grade for Quality, consistent with its high profitability.

MSFT is ranked #11 in the 48-stock Software - Business industry. Click here to access MSFT’s Growth, Value, Momentum, and Sentiment ratings.

Bottom Line

With a slew of collaborations and partnerships propelling growth, expansion, revenue, and customer base, MSFT stands poised for substantial long-term advancement. Additionally, bolstered by robust financials, optimistic analyst outlook, profitability, and promising growth prospects, MSFT could be an ideal buy at present.

How Does Microsoft Corporation (MSFT) Stack Up Against Its Peers?

While MSFT has an overall POWR Ratings grade of B, equating to Buy, one could also check out other stocks within the Software – Business industry that are overall A (Strong Buy) rated: VMware, Inc. (VMW), F5, Inc. (FFIV) and Sapiens International Corporation N.V. (SPNS).

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MSFT shares were trading at $318.12 per share on Monday morning, up $1.64 (+0.52%). Year-to-date, MSFT has gained 33.55%, versus a 14.93% rise in the benchmark S&P 500 index during the same period.

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.

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