Microsoft Corporation's (MSFT) Azure Revenue Grew 39% in Q3

Baron Funds, an investment management company, released its “Baron Fifth Avenue Growth Fund” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. In Q3 2025, the fund gained 5.7% (Institutional Shares) compared to the Russell 1000 Growth Index’s (R1KG) 10.5% gain and the S&P 500 Index’s (SPX) 8.1% return. The fund is up 14.4% YTD compared to 17.2% and 14.8% for the indexes. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2025.

In its third-quarter 2025 investor letter, Baron Fifth Avenue Growth Fund highlighted stocks such as Microsoft Corporation (NASDAQ:MSFT). Microsoft Corporation (NASDAQ:MSFT) is a multinational software company that develops and supports software, services, devices, and solutions. The one-month return of Microsoft Corporation (NASDAQ:MSFT) was -3.38%, and its shares gained 12.02% of their value over the last 52 weeks. On December 02, 2025, Microsoft Corporation (NASDAQ:MSFT) stock closed at $490.00 per share, with a market capitalization of $3.642 trillion.

Baron Fifth Avenue Growth Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its third quarter 2025 investor letter:

"In addition to this trip, the quarterly earnings reporting season offered a flurry of data points supporting the significant opportunity behind AI in terms of both productivity enhancements and incremental revenues:

Microsoft Corporation's (NASDAQ:MSFT) Azure revenue growth accelerated to 39% with demand continuing to outstrip supply despite the company bringing on 2 GW of new DC capacity online just in the last 12 months. Microsoft’s AI foundry used over 500 trillion tokens in the last quarter, up 700% year-over year."

Microsoft Corporation (NASDAQ:MSFT) is in the second position on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 312 hedge fund portfolios held Microsoft Corporation (NASDAQ:MSFT) at the end of the third quarter compared to 294 in the previous quarter. In the first quarter of fiscal year 2026, Microsoft Corporation (NASDAQ:MSFT) reported revenue of $77.7 billion, representing an 18% and 17% when adjusted for constant currency. While we acknowledge the potential of Microsoft Corporation (NASDAQ:MSFT) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Microsoft Corporation (NASDAQ:MSFT) and shared the list of best dividend stocks hedge funds are buying. In addition, please check out our hedge fund investor letters Q3 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.