MSFT Stock To $1,000?

Forbes

07-07-2025

The OpenAI logo appears on a smartphone screen and the Microsoft logo on a laptop screen as the ... More background in Athens, Greece, on July 4, 2025. Microsoft cuts up to 9,000 more jobs as it invests in AI. (Photo by Nikolas Kokovlis/NurPhoto via Getty Images)
Microsoft's stock (NASDAQ:MSFT) has already achieved remarkable gains, increasing over 2x from $235 in early 2023 to about $500 now. What factors could drive the stock to double from its current value over the next few years? The answer is found in Azure and AI – the main growth engine for Microsoft. The company's AI strategy is yielding tangible results, with notable uptake of its AI-driven features across its product offerings. This momentum, especially in its cloud computing sector, positions Microsoft for significant future expansion as businesses progressively adopt AI solutions in their operations.
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Microsoft is making a significant investment in its AI infrastructure, with capital expenditures expected to rise from approximately $44 billion in 2024 to over $80 billion in 2025. This considerable investment is largely driven by the growing demands of artificial intelligence.
Azure is the primary beneficiary of this investment in AI infrastructure, experiencing over 30% growth that is anticipated to persist in the near future. However, Microsoft's integration of AI extends well beyond Azure. Hundreds of thousands of customers are already utilizing Microsoft 365 Copilot to transform their daily workflows. This represents a major transition for Microsoft, shifting from the sale of traditional software licenses to providing AI-driven productivity improvements, which command premium pricing and encourage deeper customer dependence. For instance, more than 230,000 organizations—including 90% of the Fortune 500—have already embraced Copilot Studio to create AI agents, indicating Microsoft's successful shift from pilot projects to widespread enterprise implementation.
Revenue Acceleration
Microsoft's Intelligent Cloud segment serves as the company's foremost revenue driver, producing roughly $105 billion in 2024 with impressive 20% growth. This segment is Microsoft's fastest-growing and highest-margin area, benefiting from its unique status as both a cloud infrastructure provider and a leader in enterprise software. The incorporation of AI capabilities into Azure services further increases its value, while strong enterprise relationships ensure customer loyalty and opportunities for upselling.
While Azure's rapid growth garners significant attention, Microsoft's Productivity and Business Processes segment provides an essential foundation. This segment, which includes Microsoft 365, generated $78 billion in 2024, delivering stable, recurring income. This dependable revenue source allows Microsoft to finance investments in high-growth fields such as AI and cloud services. The 82.5 million Office 365 subscriptions, an increase of 10% year-over-year, highlight the stickiness of this business. With total annual revenues exceeding $245 billion, this stable base enables Microsoft to aggressively invest in AI and cloud infrastructure while maintaining strong profitability across its varied business portfolio.
Path To 2x Growth
For Microsoft's stock to double, the company must maintain its impressive growth, predominantly driven by its strategic leadership in AI and cloud computing. This growth will likely be propelled by the increasing adoption of AI across its Azure platform and the robust monetization of its AI-driven software, especially Microsoft 365 Copilot.
Examining the figures, we estimate Microsoft's revenues will surpass $405 billion within the next four years, with adjusted earnings exceeding $20 per share. Currently trading around $500, MSFT stock is valued at about 14 times its trailing revenues. Although this is slightly higher than its four-year average price-to-sales (P/S) ratio of over 12 times, the substantial growth in Azure and Copilot may justify a premium. If Azure sustains its remarkable 30%+ growth rate, the accelerated revenue could merit even higher valuation multiples.
Additionally, AI services often yield higher margins than traditional cloud infrastructure. As AI becomes a more significant contributor to Microsoft's revenue, operational leverage could lead to considerable profit growth. If Microsoft establishes a clear lead in enterprise AI, mirroring its historical dominance in productivity software, investors might attribute a lasting premium valuation to the stock. Even a minor increase in the P/S ratio to 18 times could push the stock beyond $1,000 within the next four years.
The combination of growing revenues across all segments and improved profitability stemming from AI efficiencies could substantially enhance investor confidence in Microsoft. As the company showcases its ability to monetize significant AI investments while preserving market leadership, investors may begin to apply premium valuation multiples typically reserved for high-growth technology firms. This multiple expansion, coupled with fundamental business growth, provides a mathematical foundation for the stock to double. This outcome relies on both sustained revenue growth and a reevaluation of Microsoft's long-term earnings potential within the AI economy.
Potential Risks to Growth
While Microsoft's trajectory appears optimistic, a number of factors could impede the stock from doubling. The primary concern is the normalization of AI spending. Companies might become more cautious about initiating new Azure projects, implying that the current rate of AI investment may not be sustainable over the long term. Additionally, competition from Google, Amazon, and emerging competitors could also challenge Microsoft's pricing power in the AI market and its ability to gain market share. High-interest rates could render growth stocks like Microsoft less attractive compared to fixed-income alternatives. In summary, investors considering a position in Microsoft should also account for these risks. Now, we implement a risk assessment framework while developing the Trefis High Quality (HQ) Portfolio, which, consisting of 30 stocks, has a record of significantly outperforming the S&P 500 over the last four years. Why is that? Collectively, HQ Portfolio stocks have delivered superior returns with lower risk compared to the benchmark index; experiencing less volatility, as shown in HQ Portfolio performance metrics.