Hi YXI friends,

On Wednesday, Microsoft revealed that Azure is printing growth stock numbers at a huge revenue base. Revenue has also accelerated meaningfully from the latest stagnation.

However, the stock has run up significantly since April. Does the renewed growth justify MSFT’s latest valuation? What does our machine learning model say?

Let’s find out!

Table of Contents

• 1. Business Highlights

• 2. The 3 Key AI Themes

• 3. Profitability

• 4. Valuation

• 5. Technical analysis

• 6. Machine Learning

DISCLAIMER: This newsletter is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.

1. Business Highlights

MSFT Business Segments

Microsoft boasts dozens of products, but its business is divided into 3 major segments:

1. Productivity and Business Processes, contributing $33 billion or 43% of the quarter revenue,

2. Intelligent Cloud, bringing in $30 billion or 39% of the revenue, and

3. More Personal Computing, accounting for $13 billion or 18% of the revenue.

Among them, Intelligent Cloud is the fastest performer, growing 26% YoY, while P&BP moves 16% growth. More Personal Computing grows just shy of 10% YoY.

For the next quarter, FY2026 Q1, Intelligent Cloud is expected to grow at 21-22%. P&BP is guided to grow at 11-12%. More Personal Computing is expected to stay at the 8-10% pace.

A further breakdown shows that Server products and cloud services grew at 27% YoY.

Notably, Azure grew by 39% YoY with an annualised run-rate of $75 billion. This is a growth stock pace at a monster scale.

As Azure provides cloud and AI consumption-based services, infrastructure and platform services, its fast growth highlights Azure’s competitiveness compared with AWS and Google Cloud.

In terms of AI infrastructure, MSFT enjoys 400+ data centres across 70 regions globally, more than any competitor.

Microsoft 365 Commercial grew by 16%, while Consumer by 21%. These are both very health numbers. Currently, over 100 million monthly active users of Copilot app.

Quarterly Revenue

Overall, MSFT’s quarterly revenue reached $76 billion, an 18% growth YoY. This is a meaningful acceleration from both the previous quarter and Q4 last year.

MSFT’s Commercial Bookings in Q4 was over $100 billion, growing at 37% YoY. Its Remaining Performance Obligation stands at $368 billion, another 37% YoY. They bode well for MSFT’s new phase of AI-driven growth in the next year.

TTM Revenue

MSFT’s TTM Revenue grows at 15% right now, but this should see acceleration in the coming quarters.

2. The 3 Key AI Themes

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