Microsoft Expands Security Footprint: Is it the Next Revenue Pillar?

Microsoft's MSFT aggressive expansion into cybersecurity services is gaining momentum as a potential major revenue driver, with the company recently launching its European Security Program and reporting strong growth metrics in its security customer base.

The tech giant now serves 1.4 million security customers globally, with over 900,000 utilizing four or more security workloads, representing 21% year-over-year growth. This customer concentration suggests deepening enterprise relationships and higher revenue per customer, critical indicators for sustainable growth in the security segment.

Microsoft's European Security Program, announced in Berlin, offers free AI-based threat intelligence sharing to European governments, including all 27 EU member states. While provided at no cost, this strategic move positions Microsoft to capture future commercial opportunities and establishes the company as a trusted security partner across a significant economic bloc.

The integration of artificial intelligence into security operations appears central to Microsoft's strategy. The company processes 84 trillion daily threat signals and has introduced Security Copilot agents designed to autonomously handle high-volume security tasks. This AI-powered approach could differentiate Microsoft's offerings in an increasingly crowded cybersecurity market.

Microsoft's identity service Entra has reached more than 900 million monthly active users, providing a substantial foundation for cross-selling additional security services. The company's multi-workload customer growth suggests successful expansion beyond basic security offerings into comprehensive enterprise solutions.

With cybersecurity threats intensifying globally and organizations increasing security budgets, Microsoft's expanding security portfolio — leveraging its cloud infrastructure and AI capabilities — positions the segment as a potentially significant revenue contributor alongside its established cloud and productivity businesses.

Competition Intensifies in Cybersecurity Market

Microsoft's 1.4 million security customers contrast sharply with pure-play cybersecurity specialists. CrowdStrike CRWD focuses on premium enterprise segments, with 48% of subscription customers adopting six or more cloud modules, while 32% utilize seven modules and 22% deploy eight or more modules as of April 2025. CrowdStrike's AI-native Falcon platform directly challenges Microsoft's security offerings, though CrowdStrike maintains superior endpoint protection brand recognition. 

Palo Alto Networks PANW serves more than 80,000 enterprise customers, pursuing platform consolidation strategies similar to Microsoft's multi-workload approach. Palo Alto Networks continues expanding AI capabilities through acquisitions, yet Palo Alto Networks lacks Microsoft's integrated cloud infrastructure advantages for seamless delivery.

The Zacks Rundown for MSFT

The Zacks Consensus Estimate for Microsoft’s fiscal 2025 revenues is pegged at $278.8 billion, suggesting 13.47% year-over-year growth. The consensus mark for earnings is pegged at $13.33 per share, indicating a 12.97% year-over-year increase.

Microsoft Corporation Price and Consensus

Microsoft Corporation price-consensus-chart | Microsoft Corporation Quote

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

The stock's current valuation of 11.09 times forward sales appears to fully account for near-term growth potential, exceeding the Zacks Computer - Software industry average of 9.16 times.

MSFT’s P/S F12M Ratio Depicts Stretched Valuation

Shares of Microsoft have returned 10.1% year to date compared with the Zacks Computer & Technology sector’s growth of 0.4%.

MSFT’s Year-to-Date Performance

MSFT stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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