Is Microsoft (MSFT) the Most Profitable Blue Chip Stock to Buy Now?

We recently published a list of 10 Most Profitable Blue Chip Stocks to Buy Now. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against other most profitable blue chip stocks to buy now.

Blue chip stocks are large, financially stable companies with strong market presence, consistent profitability, and regular dividend payments. They are generally market leaders, with strong business models that are resilient across business cycles. Many blue chip stocks are included in the Dow Index (DJIA), so the index is often considered an indicator of their overall performance. Investors would typically flock to blue chip stocks in times of market volatility, economic uncertainty, or when the economy is in late-stage expansion, as these large-cap companies tend to offer stability and consistent returns versus smaller or riskier companies.

We believe that blue chip stocks, and the constituents of the Dow index in particular, represent a unique blend of the value and size factors, combining the financial stability, earnings consistency, and attractive market valuations typically associated with value stocks, with the scale and market dominance of large-cap companies. This dual exposure enhances their resilience in economic downturns and makes them well-positioned to outperform during recessions, when investors tend to shift towards quality and safer stocks. For reference, the Fama–French Three-Factor Model, introduced in 1993, concludes that incorporating exposure to several favorable factors can further enhance stock returns. In this context, both the value and large size factors outperformed in the last years, and especially year-to-date.

READ ALSO: 10 Most Profitable Large Cap Stocks to Buy Now

Our research indicates that recession fears and Trump Turmoil are likely to persist and potentially continue to favor the most profitable blue chip stocks over everything else. The US administration appears to be eroding the trust of investors through a plethora of unpredictable and contradictory moves – Trump appeared to soften his stance on the US-China trade war, saying that tariffs on Chinese goods “will not be as high as 145 per cent” and that “it’ll come down substantially, but won’t be zero”. While this represents a good signal at first glance, such actions are very likely to deter the US’s partners from negotiating for tariff exemption, simply because the current administration has become too unpredictable.

Our thoughts are confirmed by the VIX volatility index remaining elevated compared to the long-term trend, while the crude oil price remains in a downtrend, suggesting expectations of weaker industrial demand and a weaker economy. On the consumer side, there are reasons to believe that US consumers are getting more cautious than ever – the employee quits rate, as reported by FRED, declined substantially year-to-date and reached levels comparable to the aftermath of the 2008 financial crisis. When employees are reluctant to quit it means two things: (1) it is tough to get jobs out there, implying that the economy is slowing down, and (2) their expectation about the future becomes more pessimistic, which leads to less willingness to quit and potentially risk difficulties finding a new job. Both these factors mean the consumer spending will likely slow down in the following quarters, further pressuring GDP growth.

The key takeaway for the readers is that the odds of a recession and of a prolonged bear market still persist. In this context, the best hedging strategy would be to hold shares of companies that perform well in bull markets, but at the same time can offer protection against turmoil and recessions. Our belief is that the most profitable blue chip stocks are the best candidates, because they possess the wide moat and strong cash flow capacity to withstand any economic slowdown and even potentially absorb the incremental tariffs.

Our Methodology

To compile our list of most profitable blue chip stocks to buy now, we screened for current and former members of the Dow Jones Industrial Average index and identified companies with the highest net income generated in the latest reported fiscal year. From that group, we picked companies with the highest net profit margin, which suggests sound financial health and excellent cost management. The stocks are ranked in ascending order of their net profit margin as of the most recent quarter. For each stock, we also included the number of hedge funds that own the stock as of Q4 2024, according to Insider Monkey’s database.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

Microsoft Corporation (NASDAQ:MSFT)

Net Profit Margin: 35.4%

Last year’s net income: $88.14 billion

Number of Hedge Fund Holders: 317

Microsoft Corporation (NASDAQ:MSFT) is a global technology leader that offers a complete range of software, services, and devices. Its core offerings include the Windows operating system, productivity and collaboration software (Office suite), cloud platforms, enterprise solutions, development tools, and devices like Surface PCs and Xbox consoles. The company also creates value through platforms like Microsoft 365, Azure, LinkedIn, and GitHub, which have become leaders in their niches. MSFT’s innovation is centered on creating AI responsibly, unlocking next-generation tools that make humans more productive, secure, and efficient.

Microsoft Corporation (NASDAQ:MSFT) delivered strong financial performance in the latest Q2 2025, with revenue of $69.6 billion, up 12% YoY, while operating income increased 17% and earnings per share grew 10%. The Microsoft Cloud surpassed $40 billion in revenue for the first time, growing 21% YoY, while the company’s AI business reached an annual revenue run rate of $13 billion, showing remarkable growth of 175% YoY. Commercial bookings increased significantly by 67%, driven largely by Azure commitments from OpenAI, and the commercial remaining performance obligation grew to $298 billion, up 34%.

In terms of strategic developments, Microsoft Corporation (NASDAQ:MSFT) is seeing enterprises move from AI proof of concepts to enterprise-wide deployments. The company’s Microsoft 365 Copilot is gaining significant traction, with existing enterprise customers expanding their seat purchases and major organizations like Novartis, Barclays, Carrier Group, and Pearson making substantial commitments of 10,000 or more seats this quarter. MSFT is also making strategic investments in AI infrastructure, having doubled its overall data center capacity in the last 3 years and added more capacity last year than any other year in its history. The company remains focused on continuously scaling its fleet globally while maintaining the right balance across training and inference, as well as geographical distribution. With a whopping $88.14 billion net income earned in their latest fiscal 2024, MSFT ranks third on our list of the most profitable stocks.

Overall, MSFT ranks 3rd on our list of most profitable blue chip stocks to buy now. While we acknowledge the potential of MSFT as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than MSFT but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.

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