Microsoft (NASDAQ:MSFT) Stock at $512.57 Positioned to Outperform on AI Monetization and Margin Expansion

Microsoft (NASDAQ:MSFT) at $512.57 Riding AI-Fueled Revenue Surge

A $512.57 quote on Thursday reflects investors’ confidence in Copilot integration and Azure expansion. Q4 FY25 top-line reached $64.3 billion, up 14.4 percent year-over-year, as Office 365 Commercial bookings grew double digits and Azure sales climbed 34 percent to $28.8 billion. Copilot adoption—now active at over 200 000 enterprises—added an incremental $3 to $5 per user per month, translating into hundreds of millions in annual recurring revenue. This suite-wide AI rollout has lifted Microsoft’s blended operating margin to 44.8 percent, nearly 430 basis points above last year’s figure, even after absorbing elevated AI-related CapEx.

Cost Discipline and 19 450 Job Cuts Spark Margin Upside

Since May, Microsoft has reduced headcount by roughly 8.5 percent of its 228 000 Q4 FY24 workforce, cutting 19 450 positions across sales, Xbox, and corporate units. Based on a $0.60 million annualized operating expense per employee, these cuts imply $12 billion in savings—about a 4.3 percent boost to EBIT margins. This far exceeds Wall Street’s $3–4 billion estimate. CFO guidance at the BoFA Technology Conference confirmed that Copilot-driven productivity gains help redeploy reinvested AI savings back into R&D while holding SGA flat at $30 billion.

Technical Set-Up: $500 Support, $520 Resistance

MSFT’s intraday range between a low of $511.56 and a high of $517.62 shows buyers defending the $510–$515 zone, a critical support anchored by the 50-day EMA at $508. A breakout above $517.62 on volume exceeding 25 million shares could target a retest of the 52-week high at $518.29, while failure to hold $510 would expose the 100-day EMA near $500 and open a slide toward $480. Relative strength versus the Nasdaq 100 remains in uptrend, suggesting outperformance if MSFT sustains above $512.

Valuation Remains Attractive at 35× Forward EPS

At $512.57, MSFT trades at 35.6× its estimated $14.39 FY26 EPS, in line with sector median of 36.5× but backed by superior revenue visibility and margin runway. A base-case multiple of 34× applied to consensus EPS yields a fair value near $490, yet factoring in AI-driven growth an expanded 38× multiple supports a target of $547. Even under a conservative 32× multiple on FY27’s $17.80 EPS, the valuation implies $569, underscoring upside in both earnings recovery and multiple expansion.

Macro Tailwinds and AI Sovereignty Offer Extra Levers

The U.S. AI Action Plan signals accelerated federal data-center buildouts, with potential to channel billions toward Azure and Copilot contracts. Regulatory clarity from the SEC’s Activision settlement removes an overhang, while pending approvals for GitHub Copilot in regulated industries (healthcare, finance) open new verticals. Microsoft’s blend of cloud infrastructure, enterprise software, and government partnerships creates a diversified exposure rarely found in a single name.

Buy Rating: Position for AI-Driven Upside

Combining robust 14 percent revenue growth, a 430 basis-point margin tailwind from cost cuts, technical support at $510, insider buying, and favorable valuation multiples, Microsoft stands out as a top pick. The next catalyst will be Q4 FY25 earnings release on July 30, where upside surprises on both revenue and operating margin could propel shares toward $550. Maintain or initiate new positions ahead of the report—Buy NASDAQ:MSFT.

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