For savvy investors looking for a long-term investment opportunity that is riding the unstoppable wave of artificial intelligence (AI), cloud computing, and digital transformation, Microsoft (MSFT) is a hypergrowth stock that cannot be overlooked. 

Microsoft has positioned itself for long-term growth by expanding its AI infrastructure and maintaining dominance in multiple business segments. 

Microsoft stock has returned more than 960% over the last decade, thanks in large part to its legacy products. So far this year, the stock is up 17.4%, far outperforming the tech-heavy Nasdaq Composite Index’s 5.7% gain. Let’s find out if it is the right time to buy this exceptional stock.

Microsoft Cloud: The Growth Engine

In the third quarter of its fiscal 2025, total revenue of $70.1 billion increased by 13% year over year. Diluted earnings per share climbed to $3.46, an 18% increase, exceeding Wall Street expectations. Microsoft continues to demonstrate strong operational discipline, with operating margins rising to 46%, a one-point increase year-over-year. This expansion was fueled by strong cloud and AI momentum, effective cost management, and growing customer loyalty to Microsoft platforms.

But perhaps the most notable improvement in the quarter was its commercial remaining performance obligation (RPO) of $315 billion, up 34% year over year, indicating long-term revenue visibility. The company expects to recognize 40% of that total over the next 12 months, with the remainder set aside for future years. This increases investor confidence in Microsoft’s ability to maintain growth in the coming years.

The cloud is Microsoft’s primary growth engine, accounting for 21% of the global cloud computing market, trailing only Amazon’s (AMZN) AWS. The Microsoft Cloud segment, which includes Azure, Dynamics 365, and Microsoft 365, generated $42.4 billion in revenue this quarter, representing a 20% year-over-year increase. The true star, however, is Azure, Microsoft’s flagship cloud platform. Azure and other cloud services increased revenue by 33%. This explosive growth is being driven by enterprise adoption, developer enthusiasm, and expanding use cases across industries, including healthcare, finance, manufacturing, and retail. Major corporations, including Coca-Cola (KO), ServiceNow (NOW), and Abercrombie & Fitch (ANF), are expanding their Azure presence. 

Furthermore, the tech giant continues to expand its global data center capacity, opening new facilities in 10 countries and four continents in a single quarter. What’s more impressive is that Microsoft has already encountered AI capacity constraints due to higher-than-expected demand. That is a problem that every investor should be happy about because it indicates that there is more demand than Microsoft can currently meet, pointing to a strong growth runway over the next decade. Its strategic partnership with OpenAI, which resulted in an 18% increase in commercial bookings, indicates the company’s unique position to monetize next-generation AI technologies.

Growth Goes Beyond the Cloud

Microsoft’s hypergrowth is not limited to cloud and AI. Other segments make significant contributions as well. Productivity and Business Processes, which includes Microsoft 365 and LinkedIn, brought in $29.9 billion, a 10% increase year over year. Search and news advertising revenue (excluding traffic acquisition costs) increased 21% due to volume growth and higher ad rates. Furthermore, gaming revenue increased by 5%, with Xbox content and services up 8%.

While many tech giants are cutting costs or delaying investments, Microsoft is doing the opposite, but with discipline. The company spent $21.4 billion on capital expenditures, with roughly half going toward long-lived assets that will support monetization for 15 years or more, and the rest going toward server capacity (including GPUs) to meet growing AI demand. 

Despite these investments, Microsoft generated free cash flow of $20.3 billion and returned $9.7 billion to shareholders in dividends and buybacks. Microsoft maintains a balance between rewarding shareholders and investing for the future. Microsoft intends to continue investing aggressively in fiscal 2025 and fiscal 2026, particularly in short-lived assets such as servers, which are directly related to revenue. Over the next decade, this strategy will drive rapid AI growth and monetization. Analysts predict that the company’s earnings will rise by 13.6% in fiscal 2025 and by another 12.8% in fiscal 2026. Microsoft stock is currently trading at 32 times forward earnings, which makes it slightly expensive. However, given its infrastructure, talent, partners, and user base to lead in AI, cloud, and beyond, the premium for this hypergrowth stock is justified.

What Does Wall Street Say About Microsoft Stock?

Overall, Wall Street has assigned Microsoft stock a “Strong Buy” rating. Of the 46 analysts covering MSFT stock, 37 have a “Strong Buy” recommendation, five suggest a “Moderate Buy,” and four rate it a “Hold.” The average price target of $528.88 implies the stock has upside potential of 7% over current levels. Plus, the Street-high price estimate of $626 suggests the stock can rally over 26% over the next 12 months.

The Bottom Line on MSFT Stock

Microsoft isn’t just another tech stock riding the AI trend. It offers an unrivaled mix of scale, trust, recurring revenue, product diversity, and progressive innovation. With $315 billion in long-term contracts, unrivaled AI infrastructure, expanding product margins, and visionary leadership under CEO Satya Nadella, Microsoft is a hypergrowth stock that is not only thriving today, but also poised to dominate through 2030.