
Can Microsoft Join the $4 Trillion Club in 2025?
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Microsoft (MSFT -0. 28%) had a market capitalization of $3. 695 trillion as of Friday morning. That means its stock only needs to climb by another 8. 3% for the...
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June 28, 2025
06:17 AM
The Motley Fool
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Microsoft (MSFT -0. 28%) had a market capitalization of $3. 695 trillion as of Friday morning
That means its stock only needs to climb by another 8. 3% for the company to become the founding member of the $4 trillion, which I think is a very strong possibility by the end of 2025 (although Nvidia (NVDA 1. 74%) with its $3. 835 trillion market cap could get there first)
Artificial intelligence (AI) has been the primary driver of Microsoft's increasing value over the last couple of years
The company is apaching this lucrative opportunity from several different angles, and it has already become an industry leader in the software and cloud segments
Image source: Getty Images
Here's why AI could be Microsoft's ticket to a $4 trillion valuation this year
Microsoft has a diverse AI duct portfolio Microsoft has invested around $14 billion in ChatGPT creator OpenAI since 2019, and it has combined the start-up's industry-leading AI models with its own to create the Copilot virtual assistant
Copilot is accessible for free in some of Microsoft's flagship software ( Windows, Edge, and Bing), but it's also available as a paid tool in several ducts, the ing: 365 (Word, Excel, PowerPoint): Enterprises can add Copilot for an additional monthly subscription fee to boost the ductivity of their employees
In the fiscal 2025 third quarter ( March 31), Microsoft said the number of organizations using Copilot for 365 tripled year over year to the hundreds of thousands
Copilot Studio: This platform allows enterprises to create custom AI agents and deploy them into the software applications they use each day to boost ductivity, and it already has over 230,000 customers
Dragon Copilot: This is a solution for the healthcare industry, which can autonomously transcribe conversations between doctors and their patients, rapidly generate referral letters, and even summarize diagnosis evidence to help imve outcomes
But Copilot isn't the only revenue-generating AI duct in Microsoft's portfolio because the company operates one of the world's largest cloud computing platforms called Azure, which now offers a suite of AI ducts and services under the Azure AI banner
Azure AI leases state-of-the-art data center infrastructure to es, which is fitted with the AI chips from suppliers Nvidia
It also offers access to ready-made large language models (LLMs) from the s of OpenAI, which developers can use to accelerate their AI software jects
AI is quickly becoming the driving force behind Azure Azure is often the fastest-growing part of Microsoft's entire organization, but it might have lost that title recently if not for Azure AI
A little less than two years ago, Azure AI accounted for just five percentage points of Azure's quarterly revenue growth
In the recent fiscal 2025 third quarter, it represented 16 percentage points, meaning it accounted for almost half of Azure's overall growth
The contribution from Azure AI is ly to increase further from here because Microsoft CFO Amy Hood says the segment has a staggering $315 billion order backlog from AI customers who are waiting for more data center capacity to come online
Microsoft is building more data centers as fast as it can, and it opened new ones in 10 different countries during the last quarter alone
In fact, the company is on track to have spent over $80 billion building AI infrastructure during fiscal 2025, which ends on June 30
Management's guidance suggests that the figure is ly to grow in fiscal 2026, which isn't a surprise, given the size of the opportunity ahead
Can Microsoft join the $4 trillion in 2025
Based on Microsoft's trailing 12-month earnings per (EPS), its stock is trading at a price-to-earnings (P/E) ratio of 38
That's 14% higher than its five-year average of 33. 4, which suggests investors are willing to pay a premium for the stock at the moment: Data by YCharts
Microsoft's fiscal year 2026 begins on July 1, and Wall Street's consensus estimate (vided by Yahoo
Finance) suggests the company could der $15. 14 in EPS, which would represent growth of over 13%
That places its stock at a forward P/E ratio of 32
That means Microsoft stock would have to climb by around 17% over the next 12 months in order to maintain its current P/E ratio of 38. 2, which is a fair assumption given the strength of its AI
If the company ders strong earnings during the first two quarters of fiscal 2026 (which fall in calendar year 2025), then investors might start pricing in the full-year result early -- especially considering that the stock market is a forward-looking machine
In other words, it's possible Microsoft stock will der the majority of that 17% in potential upside in the next six months or so
Remember, it only needs a gain of 8. 3% for the company's valuation to hit $4 trillion, so it could certainly achieve the milestone before 2025 is over
Anthony Di Pizio has no position in any of the stocks mentioned
The Motley Fool has positions in and recommends Microsoft and Nvidia
The Motley Fool recommends the ing options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft
The Motley Fool has a disclosure policy.
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