Microsoft's Least Exciting Business Line Is Its Most Important, and Investors Shouldn't Overlook It

Core Insights - Microsoft is leveraging its legacy products, particularly Office 365, to generate stable revenue that funds its investments in artificial intelligence (AI) [1][2][6] - The company reported $54.9 billion in revenue from Office products for fiscal year 2024, accounting for 22% of total revenue, indicating strong performance and growth potential [3][7] - Microsoft is making significant investments in AI, with plans to allocate approximately $80 billion for AI-enabled data centers [9] Revenue Generation - Office 365 reached 400 million paid seats in January 2024, showcasing its widespread adoption and integration into professional environments [1] - The legacy suite of Microsoft 365 products continues to grow by double digits year over year, demonstrating resilience and ongoing demand [7] - Azure's income reached $75 billion, a 34% increase, highlighting the rapid growth of Microsoft's cloud services [10] Competitive Positioning - Microsoft is catching up in the generative AI space, having partnered with OpenAI and investing in Nvidia chips to enhance its capabilities [4][5] - The company's market cap is nearing $4 trillion, with significant growth potential if its AI initiatives succeed [11] - Microsoft remains a solid long-term investment due to its stable product lines and a quarterly dividend of $0.91 per share, despite a dividend yield under 1% [12] Future Outlook - The growth in legacy products supports Microsoft's capital-intensive investments in AI, reducing the risk compared to competitors heavily focused on AI alone [9][13] - Overall revenue increased by 18% from Q4 2024 to Q4 2025, indicating a positive trajectory for the company [13]