Microsoft (NASDAQ: MSFT) has seen a 15% increase in its stock price in 2025, lagging behind the S&P 500’s 16% rise. In Q1 of fiscal 2026, Microsoft reported revenue of $77.67 billion, an 18% year-over-year increase, while the forecast for Q1 2027 is $88.64 billion, predicting a 14% YOY increase.
Microsoft maintains a robust user base with over 400 million paid Microsoft 365 seats and 1.6 billion active Windows devices, which create high switching costs for businesses. Over 70% of its revenue in fiscal 2025 came from recurring sources, pushing commercial cloud revenue to exceed $160 billion annually with steady gross margins near 72%.
Looking ahead to 2026, Microsoft’s growth narrative may hinge on the performance of its Copilot feature in Microsoft 365, specifically its potential to drive revenue per user and seat upgrades. This shift could sustain investor interest in a stock priced at a price-to-earnings (P/E) ratio around 34x.
