Jim Cramer on Microsoft Corporation (MSFT): "Penalty will be severe" - Azure Must Deliver or Face PE Pressure

We recently published a list of Jim Cramer’s Game Plan for This Week: 16 Stocks in Focus. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against other stocks that Jim Cramer discussed.

On Friday, Mad Money host Jim Cramer took a close look at what he called one of the most important stretches of the earnings season, which came alongside major economic developments.

“We made it. Yep, we got through another stretch without the White House upending the whole market, which therefore led to the second-best week of the year.”

READ ALSO Jim Cramer Put These 16 Stocks Under a Microscope and Jim Cramer Recently Talked About These 15 Stocks

Still, Cramer warned that the real challenge lies ahead, as the market now enters another week where important earnings are reported. He expressed concern that the reprieve from political interference may be short-lived, just as investors need to stay focused on corporate performance. Cramer pointed out that clarity on President Trump’s influence won’t be long in coming. With the president in Europe for a funeral, Cramer speculated he may still pursue trade talks behind the scenes.

“But there’s no doubt that he’s going to probably try to nail down some trade deals this weekend, maybe with emissaries from Japan and South Korea. Hey bears, be aware, if any country’s willing to compromise with Trump, the rest of the world might fall in line. And honestly, if we can’t win over Japan and South Korea, two countries where we have a ton of military bases, well, we might as well throw in the towel.”

Looking ahead to the end of the week, Cramer emphasized the significance of Friday’s upcoming non-farm payroll report from the Labor Department. The prior week’s market strength, he noted, was partially due to President Trump taking a break from criticizing Federal Reserve Chair Jerome Powell. Cramer hoped that the restraint would last, though he remained skeptical, calling it a “temporary stay of execution.” The data on employment could shape the Fed’s next move, he explained.

Cramer believes that a weaker jobs number might help Powell justify a rate cut in the near future. He added that the Fed is in a tough spot: “It’s mighty hard to cut rates when you’re raising the price of everything imported by a pretty hefty sum.” The central bank, he said, must balance economic pressure from tariffs with the need to act quickly if unemployment rises sharply. While he doubts the Fed can afford to make a move right now, he stressed that they must be ready to cut rates at the next meeting if job losses spike.

“Here’s the bottom line: This is a really consequential week ahead. We’re about to get into the weeds with tariffs, and we have to sort out what’s real and what’s just mandated by the president. Most important, we need to see some trade deals, please. With them, the market can absorb some earnings disappointments, but without them… things could get really ugly very quickly after the run up we just had.”

Our Methodology

For this article, we compiled a list of 16 stocks that were discussed by Jim Cramer during the episode of Mad Money aired on April 25. We listed the stocks in the order that Cramer mentioned them. We also provided hedge fund sentiment for each stock as of the fourth quarter of 2024, which was taken from Insider Monkey’s database of over 1,000 hedge funds.

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)

Number of Hedge Fund Holders: 317

Discussing how Microsoft Corporation (NASDAQ:MSFT) needs to show that its different businesses are doing well, Cramer said:

“After the close, alright, here we go, Meta Platforms and Microsoft, both important, and the Street’s really split on these two… Microsoft’s disappointed investors three straight times, three quarters in a row, mostly by issuing soft outlooks after delivering solid results. Now I think we need to see this Copilot gain some serious traction while data center spending stays strong, but not too strong. We don’t want them to spend even more than they thought, and Azure, its cloud business, gets back into an accelerated group. That might be a tall order, but I think this company knows the penalty will be severe to its price to earnings multiple, the PE multiple, if it misses a year’s worth of earnings reports.”

Microsoft (NASDAQ:MSFT) creates software, services, devices, and solutions that include productivity tools, cloud platforms, business applications, gaming products, and other offerings for both consumers and organizations.

Overall, MSFT ranks 9th on our list of stocks that Jim Cramer discussed. 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 timeframe. 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.