Microsoft Stock Hits Stride in 2025-How Much More Can It Run?

Unlike some stocks, investors don’t need to be convinced to buy Microsoft Corp. (NASDAQ: MSFT) stock when it’s in a downturn. As recently as April of this year, Microsoft stock dropped nearly 20% over concerns about the threat posed by Deep Seek to the artificial intelligence (AI) growth story, of which Microsoft, through its association with OpenAI, is a key player.

Investors bought that dip and have kept buying MSFT stock—so much so that the nearly 20% drop has turned into a gain of over 23% for the year.

That makes some investors concerned about buying the top. Of course, no stock always moves in one direction and a healthy pullback in Microsoft stock may be in order.

But there are many reasons to believe that those concerns are unfounded. First, it’s important to look at the past for some context.

Uncommonly Consistent Performance Over Time

Microsoft is one of the mega-cap technology stocks and the second company to achieve a $3 trillion market cap. Over 70% of the stock’s float is owned by institutional investors, which means that it benefits from a steady flow of passive funds that come in like clockwork.

In many cases, heavy institutional buying acts as a lid on growth. There are several reasons for this, but consider that if active managers are overweight (i.e., fully allocated) in MSFT stock, there’s less bump from good news, but potentially more downside risk on bad news.

So it’s worth noting that over the past five years, Microsoft has delivered a total return of over 155%. That’s an average of over 30% every year. In the last three years, the total return in MSFT was over 121%, an average of 40% every year.

That’s not 3% or 4%—it’s 30% and 40%, which is a remarkable run for the stock. And if you go back further, the percentages get better.

The Three Pillars of the Microsoft Bull Case

Microsoft’s bull case centers on continued AI-driven cloud demand growth, the company’s dominant enterprise platform positioning, and strong security/product integration driving revenue expansion. These structural advantages, combined with sustained operating leverage and prudent capital returns, provide an open-and-shut case for future growth.

AI and Cloud Expansion - Microsoft remains a leader in generative AI adoption, monetizing integrations of Azure, Copilot, and Microsoft 365 across its customer base. Azure’s accelerating revenue growth is being fueled not just by lift-and-shift migrations, but also by new incremental workloads around AI, boosting total addressable market and deepening customer stickiness.

Security Platform and Enterprise Lock-In - With its broad portfolio—including Microsoft 365, Teams, Windows, Copilot, and embedded security—Microsoft increasingly acts as a “one-stop shop” for enterprise IT and security budgets. Its ability to cross-sell and bundle security drives above-market growth and high customer retention, reducing competitive risk from point-solution vendors.

How High Could Microsoft Stock Climb?

The Microsoft analyst forecasts on MarketBeat give Microsoft stock a consensus price target of $617.63. That’s a gain of over 18% from the stock’s closing price of $519.71 on October 1. That puts the stock on track to match the gains from the last three to five years.

All investors had to do to capture those gains was to hold the stock and buy on every dip. That's the same strategy to employ now. But for investors who aren’t involved in the stock, an 18% gain from current levels is reason enough to get involved.

Keep in mind that consensus price presumes average earnings growth of around 12%. That number may not seem impressive, but it accurately reflects the capital expenditures that Microsoft is making to support its future growth.

Why Owning MSFT Beats Timing It

Microsoft's stock is backed by a strong history of performance, supported by a cash-rich balance sheet, a leading position in AI, and a diversified portfolio that promotes enterprise adoption. If you need another reason to own MSFT stock, think about how it delivers shareholder value through stock buybacks and dividends, which the company has increased for 23 consecutive years.

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The article "Microsoft Stock Hits Stride in 2025—How Much More Can It Run?" first appeared on MarketBeat.