If I Could Only Buy Shares in One $1 Trillion Company Through the End of 2025, I’d Pick This Outstanding Growth Stock

In fact, Microsoft buys back more than enough stock to offset stock-based compensation. As you can see in the following chart, it has made consistent and sizable raises to its dividend and reduced its share count by 9.6% over the past decade despite rapidly expanding its stock-based compensation, which surpassed $10 billion for the first time in fiscal 2024.

Perhaps most important of all, Microsoft has more cash, cash equivalents, and marketable securities than debt on its balance sheet. It finished fiscal 2024 (ended June 30) with $18.32 billion in cash and cash equivalents, $57.23 billion in short-term investments like marketable securities, and just $42.69 billion in long-term debt.

Too often, investors focus on the quantity of company’s revenue and earnings without determining if those results are sustainable. There are countless examples of companies that developed a hit product that contributed to unbelievable results. But the product proves to be a fad, demand falls, results plummet, and the company can’t score another big idea.

Or the product gets surpassed by a better alternative: Think Apple replacing BlackBerry, Netflix surpassing Blockbuster, or simply the shift to online sales that led to companies like RadioShack going bankrupt.

Microsoft has arguably the best moat of any company valued over $1 trillion because it does so many different things so well — Microsoft Cloud, Windows, office commercial and consumer products, LinkedIn, Xbox content and services fueled by Microsoft-owned Activation Blizzard, server products, devices, enterprise services, and more.

Here’s a look at Microsoft’s fiscal 2024 results by segment.

Data source: Microsoft.

A decade ago, Microsoft earned $86.83 billion in revenue and $27.9 billion in operating income. So while its revenue is only up 161.9% over the last 10 years, its operating income is up nearly fourfold. The Intelligent Cloud business alone is generating more revenue and nearly double the operating income than the company as a whole was booking a decade ago.

Microsoft faces competition across all of its segments, but the company does an excellent job developing new tools that can be used across the business. Copilot, and AI in general, are great examples of how it deployed a similar solution across its segments and improved them all.

In sum, it would take a lot to damage the structural integrity of Microsoft’s earnings profile. So although you could say the stock looks expensive at 37.1 times earnings, the quality of those earnings and the ability to grow earnings through multiple segments and stock buybacks makes it a much better value than it appears at first glance.

For these reasons, Microsoft stands out as the company with the best balance of risk and potential reward that is valued at over $1 trillion.

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Daniel Foelber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, and Netflix. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

If I Could Only Buy Shares in One $1 Trillion Company Through the End of 2025, I’d Pick This Outstanding Growth Stock was originally published by The Motley Fool