Microsoft's AI Revenue Run Rate Just Crossed $37 Billion. Is It the Best AI Stock to Buy Now?

Microsoft (NASDAQ: MSFT) is simply a large subordinate successful the AI space, and 1 that's progressive successful it successful galore ways. It's besides 1 of the fewer companies that's telling investors precisely however overmuch gross its AI concern is generating close now. In its fiscal 2026 3rd 4th (which ended March 31), its AI yearly recurring gross grew by 123% twelvemonth implicit twelvemonth to surpass $37 billion.

That's impressive, and it's not adjacent the lone AI maturation lever Microsoft has close now.

Will AI make the world's archetypal trillionaire? Our squad conscionable released a study connected the 1 little-known company, called an "Indispensable Monopoly" providing the captious exertion Nvidia and Intel some need. Continue »

Microsoft has 2 businesses affected by AI

The astir salient of Microsoft's AI businesses is Copilot, the AI adjunct it has integrated into its Microsoft 365 productivity suite, Windows, its Edge browser, and different bundle and services. It besides has different AI tools for different parts of its business, but Copilot gets the astir attention.

Another mode Microsoft is exposed to AI is via its unreality computing platform, Azure. The ground of a unreality computing infrastructure concern is to physique excess computing power, past rent that powerfulness to customers. Cloud computing got its commencement with accepted workloads, similar concern operations, website hosting, and information storage, but present it has evolved to proviso a dense stock of AI processing power. Clients tin usage Microsoft's unreality services to bid AI models, and usage others' ample connection models to physique applications. There is simply a immense marketplace for this, and Azure's 40% maturation complaint reflects this.

Overall, Microsoft grew gross by 8% successful its fiscal Q3, which was a beauteous bully clip considering its size and maturity. However, I deliberation the banal should beryllium doing a batch amended than it is.

The champion metric to usage to gauge the valuation of an AI hyperscaler similar Microsoft is its price-to-operating-cash-flow ratio. This metric ignores superior expenditures, arsenic good arsenic gains oregon losses from investments. (Microsoft has lately had a ton of gains of this benignant owed to its ample OpenAI investment, and those interaction its earnings, and frankincense its price-to-earnings ratio.) From this standpoint, Microsoft banal hasn't been this inexpensive successful a agelong time.

While the banal has rallied a spot from its caller cyclical lows, it's inactive successful a portion that's cheaper connected a P/CFO ground than it has been since earlier COVID-19 was a thing. That shows conscionable however heavy a sell-off Microsoft's banal has undergone implicit the past half-year, and with its concern executing astatine a precocious level, it looks similar a coagulated buy.