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Microsoft Fundamental Analysis November 2023

Microsoft Fundamental Analysis

Microsoft Corporation Fundamental Analysis. The Company stands as one of the world’s foremost technology giants, wielding substantial influence across various domains. It maintains a dominant presence in the PC software arena, commanding a remarkable 73% of the desktop operating systems market share.

Microsoft’s Microsoft 365 suite is a globally acclaimed productivity software, renowned for its widespread adoption. Beyond this, the company holds a prominent position among public cloud providers, offering an extensive range of infrastructure-as-a-service (IaaS) and platform-as-a-service (PaaS) solutions on a grand scale.

Headquartered in Redmond, WA, Microsoft’s diverse product portfolio encompasses operating systems, cross-device productivity applications, server applications, business solutions, desktop and server management tools, software development tools, and video games. Furthermore, the company’s software solutions and hardware devices play a pivotal role in shaping the emerging metaverse landscape.

Microsoft engages in the design and sale of PCs, tablets, gaming and entertainment consoles, intelligent devices, and associated accessories. Its cloud-based solutions, facilitated through Azure, furnish customers with a comprehensive array of software, services, platforms, and content.

Operational Structure.

For fiscal year 2023, Microsoft reported robust revenues of $211.9 billion. The company’s operational structure comprises three core segments: Productivity & Business Processes, Intelligent Cloud, and More Personal Computing.

Productivity & Business Processes, which encompasses offerings such as Office 365, Dynamics business solutions, Teams, Relationship Sales solution, Power Platform, and LinkedIn, accounted for 32.6% of fiscal 2023 revenues.

The Intelligent Cloud segment, bolstered by Azure cloud services, contributed significantly to Microsoft’s fiscal 2023 revenues, representing 41.4% of the total.

In a strategic move, Microsoft entered into a definitive agreement in January 2022 to acquire Activision Blizzard. This acquisition will propel Microsoft’s gaming business to new heights, spanning mobile, PC, console, and cloud gaming. To address regulatory concerns, both Microsoft and Activision Blizzard mutually extended the merger agreement until October 18, 2023.

Lastly, the More Personal Computing segment, constituting Windows, Gaming (encompassing Xbox hardware, Xbox software and services), Devices (including Surface, PC accessories, and other intelligent devices), and Search (comprising Bing and Microsoft Advertising) businesses, represented 25.8% of fiscal 2023 revenues.






According to Microsoft Fundamental Analysis, we detected several reasons to buy the stock.

Pc Market

Microsoft holds a commanding position in the global desktop PC market, with its operating systems serving as the foundation for the majority of PCs across the world. This dominance is especially pronounced in the realm of enterprise computing, where the company garners a substantial portion of its revenue and profits. The emergence of the BYOD (bring-your-own-device) paradigm has provided a significant boost to Microsoft’s top-line growth. To further solidify its position, Microsoft has unveiled a range of innovative Surface devices, incentivizing enterprises to continue their reliance on Windows, particularly as they transition toward embracing BYOD and cloud computing models.

A key driving force behind Microsoft’s enduring appeal is its extensive user base of Office subscribers. This user base forms the backbone of countless enterprises, and their dependency on Office for productivity solutions creates a strong reluctance to explore alternative options. Additionally, the BYOD framework places a premium on security and seamless cloud integration, both of which align with Microsoft’s core competencies. Consequently, Microsoft has excelled in retaining its enterprise clientele, setting the stage for promising prospects in this arena.


Microsoft has made substantial investments in harnessing the potential of cloud computing. In the era of cloud computing, data and applications find their home in the cloud, with access granted to various devices with different characteristics, sizes, capabilities, and portability. This shift has led software providers to increasingly offer their solutions as subscription-based services over defined periods.

Azure, Microsoft’s cloud platform, has significantly expanded its presence, with over 60 regions announced globally. This expansion has bolstered Microsoft’s competitiveness in the cloud computing arena, which has long been dominated by Amazon’s Amazon Web Services. In the first quarter of fiscal 2024, Microsoft Cloud revenues reached $31.8 billion, marking a robust 24% year-over-year growth (23% at constant currency rates). Azure, in particular, reported an impressive year-over-year revenue growth rate of 29% (28% at constant currency rates). Looking ahead, Microsoft anticipates Azure’s growth rate to remain strong, projecting between 26% and 27% growth at constant currency rates for the second quarter of fiscal 2024.

Azure AI has emerged as a transformational force, empowering organizations to solve their most complex challenges by delivering intelligence and insights to both employees and customers. Microsoft’s exclusive cloud partnership with OpenAI has marked a pivotal milestone in the acceleration of generative AI development. The introduction of enterprise capabilities within Azure OpenAI, as well as the integration of Copilots across Microsoft 365, Dynamics 365, and Power Platform, is poised to be a game-changer.

Furthermore, Microsoft’s strategic partnerships, such as its extended collaboration with Snowflake, should bring new product integrations, focusing on AI, low-code/no-code development, and data governance. These collaborations will not only enhance the solutions offered to customers but also augment their go-to-market strategies, solidifying Microsoft’s position as a leader in the industry.

Gaming Hardware

Microsoft holds a prominent position among the top three gaming hardware providers, with its groundbreaking Xbox console being an early entrant into the gaming device market. On September 14, 2023, Xbox introduced Xbox Game Pass Core, an upgraded offering that supersedes Xbox Live Gold. This new service provides gamers with access to an advanced multiplayer network, offering a carefully curated collection of over 25 games designed for global multiplayer experiences with friends, alongside exclusive member discounts. All of these features are accessible through a monthly subscription priced at $9.99 or an annual fee of $59.99.

For more than two decades, Xbox enthusiasts have connected via Xbox Live to partake in competitive, cooperative, and immersive online multiplayer gaming experiences. The transition of existing Xbox Live Gold members into Game Pass Core members, with no alteration in pricing, has marked a significant milestone for Microsoft and has bolstered its competitive standing in the gaming industry.

In June 2023, Microsoft unveiled one of the primary motivations behind its acquisition of ZeniMax, the parent company of Bethesda. It was driven by the concern of Starfield, a highly anticipated game, becoming exclusively available on PlayStation following Sony’s exclusive deals for titles like Deathloop and Ghostwire with Bethesda. Following the completion of the acquisition, Microsoft committed to delivering Xbox and PC exclusives, and this promise has already materialized with the launch of Redfall and Starfield on September 6, 2023. Furthermore, Bethesda’s Indiana Jones game is set to be an exclusive title for Xbox and PC users. The acquisition of Activision Blizzard has further expanded Microsoft’s gaming portfolio and user base, solidifying its position in the gaming industry.

Management Execution.

Microsoft has demonstrated effective management execution in recent times, leading to the establishment of a robust cash and short-term investments reserve. As of September 30, 2023, Microsoft boasted a substantial balance of $143.9 billion in total cash, cash equivalents, and short-term investments, while its long-term debt, including the current portion, stood at $67.7 billion. This impressive cash position affords the company the flexibility necessary to pursue various growth strategies, including potential acquisitions.

It’s noteworthy to acknowledge Microsoft’s commitment to rewarding its shareholders through share repurchases and dividend disbursements. In the first quarter of fiscal 2024, the company returned a total of $9.1 billion to shareholders, with share repurchases accounting for $4.83 billion and dividend payments amounting to $5.05 billion. During this reporting period, Microsoft generated $30.5 billion in operating cash flow, resulting in free cash flow of $28.8 billion. This ability to generate substantial cash flow underscores Microsoft’s prudent investments and augurs well for maintaining its current dividend payout level, at least in the foreseeable future.

Microsoft Fundamental Analysis.

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