Microsoft Outshines Rivals in Latest Earnings Reports

Chicago, IL – May 6, 2025– Today, Zacks Investment Ideas feature highlights Amazon (AMZN), Apple (AAPL), Meta Platforms (META), and Microsoft (MSFT).

The Standout Magnificent 7: Microsoft’s Quiet Dominance

In the past two weeks, most companies within the Magnificent 7 have reported earnings, showcasing their strong market positions. Recent earnings reports came from Amazon, Apple, Meta Platforms, and Microsoft, while the previous week included Alphabet and Tesla.

Among these, Microsoft ranked above the rest.

Microsoft’s earnings results highlight its strength. The company boasts the highest Zacks Rank in the Magnificent 7 with a Zacks Rank #2 (Buy). Over the past month, three months, and year-to-date, MSFT has led the group in performance.

Microsoft’s Cloud Growth Leads Sector Competitors

This quarter, Microsoft’s cloud division clearly outperformed its rivals. Azure revenue surged 33% year-over-year, outpacing its main competitors. AI services contributed significantly, adding 12 percentage points to that growth. The broader Intelligent Cloud segment reported $26.8 billion in revenue, marking a 21% increase compared to the previous year, with operating income at $11.1 billion.

In comparison, Amazon Web Services (AWS) registered revenue of $29.3 billion, maintaining its status as a leader in market scale but achieving only a 17% growth, the slowest in five quarters. Despite a strong operating margin of 39.5%, this slowdown raises concerns regarding its competitive growth.

Google Cloud also delivered solid results, recording a 28% year-over-year revenue increase to $12.3 billion. Its operating income saw a considerable rise to $2.2 billion from $900 million a year earlier, indicating progress towards profitability.

These outcomes underline Microsoft’s strong position in enterprise cloud and its growing advantage in AI infrastructure—key factors driving long-term value. Azure’s rapid growth not only highlights Microsoft’s competitive edge but also showcases its strategic positioning in a crucial area of tech spending.

MSFT Faces Fewer Tariff Risks Than Peers

With rising US–China trade tensions, tariff exposure has become a significant risk for large-cap tech investors. Among the Magnificent 7, Microsoft is uniquely positioned due to its strong fundamentals and comparatively low exposure to China and tariff-related disruptions.

Conversely, Apple is among the most exposed, heavily reliant on Chinese manufacturing for its iPhones and iPads. This makes it particularly sensitive to increasing import costs and potential supply chain disruptions. A substantial portion of Apple’s revenue also stems from Chinese consumers, a market vulnerable to retaliatory measures.

Amazon has its own challenges. Although its North American business is solid, its global retail supply chain significantly depends on low-cost manufacturing in China. Tariffs on imported goods could squeeze margins and complicate logistics for its vendors.

Meta Platforms faces geopolitical risks and macroeconomic challenges but is less exposed to supply chain disruptions. It remains restricted in China, yet relies on global advertising spend that could be impacted by a declining US–China trade relationship.

In contrast, Microsoft’s focus on software, cloud infrastructure, and enterprise services positions it favorably against tariff-related issues. Its supply chain exposure to China is minimal, and its revenue streams are globally diversified, allowing significant growth from the US, Europe, and emerging AI demand.

Valuations of the Magnificent 7 Appear Fair

Currently, Microsoft holds the highest earnings multiple in the Magnificent 7, which may be justified. While MSFT trades above its peers, it aligns with its five-year median earnings multiple; Apple and Meta are similarly positioned, suggesting fair valuations historically.

The remaining group is trading significantly below their five-year averages, providing a favorable view for valuation-focused investors after recent price increases. Importantly, these valuations are coupled with healthy earnings growth forecasts, ranging from 12.8% annually for Apple to 24.7% for Nvidia. Microsoft expects a 14.6% growth in earnings annually over the next three to five years.

Given Microsoft’s robust competitive positioning, sustainable growth, and lower macro risk, its premium valuation appears warranted, while other Magnificent 7 stocks also seem attractively valued.

Is MSFT a Buy for Investors?

Microsoft remains a leading member of the Magnificent 7, showcasing strong cloud growth, healthy earnings momentum, and limited exposure to macro and geopolitical risks. Its premium valuation is fitting given its position in AI and enterprise markets, and its stock performance reflects increasing investor confidence.

Many peers also appear attractively valued following recent declines, yet Microsoft stands out as a solid core holding for long-term investors seeking stability and growth in an uncertain market.