After extensive AI investment, what awaits Microsoft (MSFT) in 2025?

Microsoft Corp. (NASDAQ: MSFT) has been spending heavily on artificial intelligence lately, like other tech giants including Google and Facebook. While the company is optimistic about its long-term monetization plan amid a healthy demand scenario, the market will closely watch how soon the investments translate into revenues.

For Microsoft shares, 2024 was a mixed year marked by several ups and downs. After climbing to an all-time high mid-year, the stock has lost about 9%. Experts are quite bullish on MSFT’s prospects, with consensus estimates suggesting that the stock would cross the $500 mark in 12 months. Considering Microsoft’s aggressive AI initiatives and growing demand for its cloud services, the stock seems to be a compelling investment.

Record Revenue

Microsoft generated $65.6 billion of revenue in the first three months of fiscal 2025, compared to $56.5 billion in the same period last year. Growing 20% annually, the Intelligent Cloud division, which includes the Azure business, contributed significantly to the top line. The other operating segments – Productivity & Business Processes and More Personal Computing – also registered double-digit revenue growth.

Revenue topped expectations, the seventh beat in a row. First-quarter net profit rose to $24.7 billion or $3.30 per share from $22.3 billion or $2.99 per share in the previous year’s comparable period. The company delivered better-than-expected bottom-line performance consistently in every quarter over the past two years.

From Microsoft’s Q1 2025 earnings call:

“We offer the broadest selection of AI accelerators, including our first-party accelerator, Maia 100 as well as the latest GPUs from AMD and NVIDIA. In fact, we are the first cloud to bring up NVIDIA’s Blackwell system with GB200-powered AI servers. Our partnership with OpenAI also continues to deliver results. We have an economic interest in a company that has grown significantly in value, and we have built differentiated IP and are driving revenue momentum. More broadly with Azure AI, we are building an end-to-end app platform to help customers build their own copilots and agents.”

CapEx Spree

In the most recent quarter, the company announced new cloud and AI infrastructure investments in Brazil, Italy, Mexico, and Sweden, to expand capacity in line with its long-term demand signals. It is estimated that recent investments in AI capacity expansion would result in Azure growing at an accelerated pace in the second half of the year compared to the early half. According to the company, its AI business is on track to surpass an annual revenue run rate of $10 billion next quarter. Meanwhile, there is no clarity yet on how the AI-powered Copilot chat service is performing in revenue generation.

Microsoft’s stock was trading down 1.5% on Monday afternoon, after gaining about 13% this year. The average stock price for the last 52 weeks is $420.29.