Sometimes, the best value picks are the ones that have been hiding in plain sight all along. And while Morgan Stanley has more than a handful of top picks for the new year, I do find that one of its top large-cap software picks for 2026 to be intriguing but not at all surprising. Undoubtedly, shares of Microsoft (NASDAQ:MSFT) are a favored pick by many big-name pundits and investors for the new year, and it's no mystery as to why. It's one of the leading big forces as the AI revolution enters yet another ye ...

Core Viewpoint - Microsoft is expected to deliver solid but unspectacular growth in 2026, ranking as the No. 4 stock in the "Magnificent Seven" for that year [1][4]. Company Overview - Microsoft is a computing powerhouse, offering a wide range of products including personal computers, operating systems, tablets, gaming consoles, and services like LinkedIn, Edge, and Bing [2]. - The company has made significant investments in artificial intelligence, particularly through its partnership with OpenAI, enhancing productivity and automation for users [2][6]. Financial Performance - Microsoft has experienced substantial growth over the last decade, with revenue increasing by over 230% and earnings per share and net income rising by more than 500% [8]. - For the first quarter of fiscal 2026, Microsoft reported revenue of $77.7 billion, an 18% increase year-over-year, with net income of $27.7 billion, up 12%, and earnings per share of $3.72, up 13% [10]. Segment Performance - The company operates in three primary segments: - **Productivity and Business Processes**: Revenue of $33.02 billion, up 16.6% year-over-year, with operating income of $20.41 billion, up 23.5% [11]. - **Intelligent Cloud**: Revenue of $30.89 billion, up 28.2%, with operating income of $13.39 billion, up 27.5% [11]. - **More Personal Computing**: Revenue of $13.75 billion, up 4.4%, with operating income of $4.16 billion, up 17.8% [11]. - The Intelligent Cloud segment is growing rapidly and is expected to surpass the productivity software tools as the most lucrative segment if the growth trajectory continues [11]. Investment Perspective - Microsoft is viewed as a solid and reliable investment option for 2026, with a stronger growth engine than Apple and a more effective business model than Amazon, while being less volatile than Tesla [12][13]. - The company is positioned in the middle of the pack among the "Magnificent Seven," with dynamic growth opportunities seen in competitors like Nvidia, Alphabet, and Meta Platforms [13].

Product Analysis - Microsoft's Edge browser introduces CoPilot Mode, entering the AI browser category [1]

Group 1 - Microsoft is increasingly focusing on artificial intelligence (AI), with CEO Satya Nadella mentioning AI 37 times during the fourth quarter fiscal 2025 results call [2] - The company is a major investor in OpenAI, the developer of ChatGPT, and is integrating OpenAI's technology into various products, including Copilot, Bing, Edge, and GitHub [3][4] - Microsoft operates in multiple revenue-generating segments, allowing it to invest in AI without immediate profitability pressure, unlike pure-play AI companies [5][6] Group 2 - Microsoft has significant cash flow, enabling it to allocate substantial capital towards AI development and integration [6] - Despite not being classified as a "pure" AI stock, Microsoft is deeply involved in AI technology, positioning itself as a smart investment for the future of tech [6] - The Motley Fool Stock Advisor has identified 10 stocks they believe are better investment options than Microsoft, indicating a competitive investment landscape [7][8]

Group 1 - Microsoft Corporation plans to invest over $7 billion in Wisconsin by constructing a second major artificial intelligence data center, which includes a $4 billion project alongside a previously announced $3.3 billion data center [1][2] - The new data center is expected to house the most powerful AI supercomputer globally, connecting hundreds of thousands of NVIDIA chips upon completion [2] - Microsoft is recognized as a leading technology company with a diverse product portfolio, including software products like Windows OS, Microsoft 365, and cloud services [3]

Group 1 - Microsoft Corporation (NASDAQ:MSFT) is considered one of the best fundamental stocks to buy currently, with Evercore ISI maintaining an Outperform rating and a target price of $625 despite recent declines [1][2] - The recent underperformance of Microsoft stock is not justified on a fundamental basis, according to Evercore analysts, who highlight the strong demand for generative AI workloads and steady enterprise trends as key drivers [2][3] - Azure cloud services experienced a 39% growth in the most recent quarter, and a mid-30% increase in fiscal 2026 is deemed feasible by analysts [2] Group 2 - Microsoft's positive outlook is bolstered by its ability to commercialize AI across infrastructure and application layers over the next three to five years [3] - The company is recognized for its core software products, including Windows OS, Microsoft 365 suite, and Edge browser, along with a diverse product portfolio that encompasses corporate software, development tools, video games, gaming gear, and cloud services [3]

Microsoft rolled out an AI assistant for its Edge browser Monday, as the tech giant works to compete with Google and others offering AI search tools. https://t.co/Yv4bfof32B ...