Steady Transition to Windows 11 Aids MSFT: What's the Path Forward?

Microsoft MSFT continues to dominate the desktop operating system market through Windows. The ongoing transition to Windows 11 from Windows 10 has been a major driver, boosting enterprise adoption. This, along with pent-up demand from an aging installed base, helped drive up global PC shipments in the second quarter of 2025. which rose 6.5% year over year to 68.4 million shipments, per IDC’s latest data. 

PC vendors rushed to push high shipment volumes into the United States ahead of potentially higher tariffs. Lenovo led the PC shipment market with 24.8% share, followed by HP and Dell Technologies with 20.7% and 14.3% share, respectively. All three companies offer devices powered by Windows. As enterprises prepare for the end-of-support for Windows 10 in 2025, Windows 11 commercial deployments have witnessed a 75% year-over-year surge in the third quarter of fiscal 2025, showing strong enterprise-led PC upgrades.

Microsoft has rolled out Copilot+ PCs, its latest AI-optimized Windows devices, which come bundled with exclusive features like Recall, Click to Do and a revamped Windows search, providing a more sophisticated device experience. The company has collaborated with Adobe, Canva and Zoom to integrate AI applications that improve user engagement. For the fourth quarter of fiscal 2025, Microsoft expects revenues from its More Personal Computing segment to range between $12.35 billion and $12.85 billion. 

Our model estimate for MSFT’s fourth-quarter 2025 More Personal Computing revenues is $12 billion, indicating year-over-year growth of 1%.

MSFT Faces Stiff Competition

Microsoft faces tough competition from Alphabet’s GOOGL and Apple’s AAPL robust operating systems.

Alphabet’s ChromeOS has evolved into a secure, AI-focused operating system, with the flagship Chromebook Plus offering a 12-month AI pro plan, built-in Gemini, and features like Select to Search, Text Capture and the Quick insert key. The company recently launched Lenovo Chromebook Plus 14, powered by Alphabet’s on-device machine learning capabilities with features like smart grouping, AI image editing and generative wallpapers, further reinforcing ChromeOS as a sophisticated operating system in today’s dynamic tech landscape.

Apple has been gaining share in the PC market, thanks to strong demand for the latest Mac devices powered by the M4 family of chips — M4, M4 Pro and M4 Max. The iPhone-maker launched MacBook Pro that featured these latest chips on Oct. 30, 2024, and MacBook Air on March 5, 2025. The company also recently announced macOS Tahoe 26. Apple is now expected to launch M5 chip-powered MacBooks this fall, which is likely to further drive Mac shipment volume.

MSFT’s Share Price Performance, Valuation and Estimates

MSFT shares have appreciated 21.3% in the year-to-date period, outperforming the Zacks Computer – Software industry and the Zacks Computer and Technology sector’s growth of 19.6% and 9.6%, respectively.

MSFT’s YTD Price Performance

From a valuation standpoint, MSFT stock is currently trading at a forward 12-month Price/Sales ratio of 12.04X compared with the industry’s 8.97X. MSFT has a Value Score of D.

MSFT Valuation

The Zacks Consensus Estimate for MSFT’s fiscal 2025 earnings is pegged at $13.34 per share, up by a cent over the past 30 days. The estimate indicates 13.05% year-over-year growth.

Microsoft Corporation Price and Consensus

Microsoft Corporation price-consensus-chart | Microsoft Corporation Quote

Microsoft currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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