If I Could Only Buy and Hold a Single Stock, This Would Be It

Key Points

• Microsoft's cloud business is well-positioned to continue growing in the next few years.

• The tech giant is a critical infrastructure provider supporting the AI ecosystem.

• The company also boasts strong financial performance and a robust order backlog.

• 10 stocks we like better than Microsoft ›

Investing in companies with resilient business models and high growth potential has often proved to be very lucrative for long-term retail investors. While finding such gems can be a time-consuming task, one is hiding in plain sight.

Microsoft (NASDAQ: MSFT) is one technology player that combines a well-established market dominance in the growing enterprise software space with exposure to emerging growth areas such as artificial intelligence (AI) and quantum computing.

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Here's why Microsoft can be a smart long-term pick in 2025.

Image source: Getty Images.

Lucrative AI strategy

Microsoft's AI strategy has positioned the company to benefit regardless of increasing competition and technological breakthroughs in the AI application space. Instead of focusing on building AI applications or models, the company has built the essential AI infrastructure required to support the entire ecosystem.

This becomes clear when you study how OpenAI's ChatGPT works. Every user interaction on ChatGPT requires Microsoft's Cosmos DB (a globally distributed NoSQL database service) to store chat histories, user profiles, and conversational states. The company's Azure PostgreSQL (cloud database service) manages essential metadata of the ChatGPT interaction.

Microsoft recently launched the Azure AI Foundry service to help clients design, customize, manage, and scale AI applications and agents. The service also allows clients to use a range of AI models best suited to their performance requirements, budget, and use case requirements. Azure AI Foundry service is already being used by nearly 80% of Fortune 500 clients.

Robust financial performance

Microsoft's recent financial results demonstrate exceptional performance across all business segments. The company reported revenue of over $281 billion in fiscal 2025 (ended June 30), up 15% year over year, while operating income expanded 17% year over year to reach $128 billion.

Microsoft has demonstrated strength across all its business areas. The productivity and business processes segment, built around Microsoft 365 commercial and consumer products offered as cloud services, generated $120.8 billion in revenue and $69.8 billion in operating income.

Meanwhile, the intelligent cloud segment, powered by Azure, achieved $106.3 billion in annual revenue and $44.6 billion in operating income. The more personal computing segment generated $54.6 billion in revenue and $14.1 billion in operating income.

Microsoft also boasts of exceptional future revenue visibility thanks to the $368 billion in contracted backlog.

Competitive advantages

Microsoft has created a strong competitive moat across multiple interconnected business areas.

The Azure cloud computing platform generated $75 billion in revenue in fiscal 2025, up 34% year over year. The company's Azure infrastructure now spans over 400 data centers across 70 regions -- more than the number of data centers operated by any other cloud provider. The company also added over 2 gigawatts of new data center capacity in fiscal 2025. Microsoft has also optimized these data centers to run AI workloads efficiently.

Microsoft has also built a robust software ecosystem atop the Azure infrastructure, which is also seeing strong traction. The company's Microsoft Fabric data platform saw revenue soar 55% year over year in fiscal 2025. As enterprises increasingly integrate these services into their core operations, it becomes difficult for them to switch to the competition.

Enterprise adoption of Microsoft 365 Copilot is also accelerating at a dramatic pace. Microsoft has added more Copilot seats during the fourth quarter since launching the service, as even existing customers are rapidly increasing usage.

Large addressable market

Goldman Sachs expects cloud computing sales globally to grow from $496 billion in 2023 to $2 trillion by 2030. Currently accounting for a 20% share of the global cloud spending, Microsoft is the second-leading cloud player and is well-positioned to capture a significant share in this rapidly growing market.

Microsoft is investing heavily to capture these growth opportunities. The company plans to invest nearly $100 billion in capital expenditures in fiscal 2026.

Reasonable valuation

Despite the many pros, Microsoft remains at reasonable valuations compared to many of its technology peers. The stock is trading at just over 38 times earnings and about 14 times sales. On the other hand, enterprise software peers such as Oracle and ServiceNow trade at 58 times earnings and 108 times earnings, respectively.

Microsoft also boasts a stellar balance sheet with $94.5 billion in cash at the end of fiscal 2025. The company generated $42.6 billion in operating cash flow and free cash flow of $25.6 billion during the most recent quarter. This financial foundation has enabled the company's aggressive capex strategy, while returning nearly $37 billion to shareholders as dividends and buybacks.

Considering these factors, Microsoft stands out as a stellar long-term pick for investors.

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Manali Pradhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group, Microsoft, Oracle, and ServiceNow. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.