Where will Microsoft stock be in 3 years?

Microsoft (MSFT -1.44%) The stock has delivered impressive gains for investors recently, up 95% since the beginning of last year. This solid gain has been fueled by the tech giant’s accelerated growth thanks to the growing adoption of its artificial intelligence (AI) solutions.

The good news is that Microsoft’s AI-fueled growth is just beginning, and it wouldn’t be surprising if we saw the proliferation of this technology lead to continued impressive revenue and profit growth. Let’s take a closer look at these growth drivers and see where they could take Microsoft over the next three years.

Prepared to deliver stronger growth

Microsoft just ended its fiscal 2024 year on June 30. The company will report its quarterly results later this month, but its performance in the first nine months of the year and its latest outlook point to significant growth in its financial results.

Microsoft generated $180.4 billion in revenue in the first nine months of fiscal 2024. The fiscal fourth-quarter guidance of $64 billion indicates it would end fiscal 2024 with revenue of just over $244 billion. That would be a 15% increase from fiscal 2023 revenue of $212 billion, when Microsoft’s revenue grew 7% year over year.

More importantly, Microsoft is expected to maintain a healthy double-digit revenue growth rate over the next few years, as seen in the chart below.

MSFT revenue estimates for the current fiscal year, data according to YCharts.

It’s also worth noting that Microsoft’s revenue for fiscal 2021 was $168 billion. So, if the company hits $244 billion in revenue in fiscal 2024, its top line would have grown at a compound annual growth rate (CAGR) of 13% over the past three years. This means that Microsoft’s growth in fiscal 2024 and its projected growth rate for the next few years will be stronger.

This is not surprising, given that it benefits from the growing adoption of AI in a variety of applications, such as cloud computing, personal computers (PCs), and workplace productivity and collaboration software. For example, demand for cloud-based AI services is expected to grow by almost 40% annually through 2030, generating $647 billion in revenue.

Microsoft is already benefiting from this trend, as its Intelligent Cloud revenue grew 21% year over year in the fiscal third quarter to $26.7 billion. Specifically, its Azure cloud computing service grew 31% from the year-ago period, with AI-related services driving seven percentage points of that growth.

This is not surprising, as Microsoft has seen solid growth in interest in its cloud-based Azure OpenAI service. For example, the company points out that “more than 65% of Fortune 500 companies now use Azure OpenAI,” and more importantly, customers are spending more money on its AI cloud offerings. There was an impressive 80 percent year-over-year increase in Azure deals worth more than $100 million.

This trend is likely to continue into the future, thanks to the continued growth of the cloud AI market, and as Microsoft looks to push the boundaries of this space by providing customers with access to a larger portfolio of large language models (LLMs) and small language models (SLMs) with which they can build custom AI applications.

Meanwhile, demand for Microsoft’s AI assistant Copilot is also growing thanks to the growing adoption of its AI-enabled workplace productivity software. The tech giant says that more than 60% of Fortune 500 companies now use Copilot. With the workplace collaboration market expected to double by 2027 and generate close to $72 billion in annual revenue, this is another solid growth opportunity for Microsoft.

A similar scenario is likely to play out in the PC market as well, where Counterpoint Research predicts an impressive 500 million AI-enabled laptops between 2023 and 2027. This should boost Microsoft’s Windows license sales over the next three years.

Overall, there is a high probability that Microsoft will maintain revenue growth at a level of several percent over the next few years, as shown in the chart earlier in the article.

How much growth potential can stocks have?

The chart also showed that Microsoft’s revenue could grow to $322.5 billion after a few fiscal years. Assuming the company’s top line grows another 15% in fiscal 2027 (in line with the growth it’s expected to deliver over the next few years), its revenue could reach $371 billion after three years.

Microsoft has a five-year average price-to-sales multiple of 11. Assuming the company trades at a five-year multiple that’s a discount to its current sales multiple of 14, its market cap could reach $4 trillion after three fiscal years. That would be a 15% increase from current levels. However, if Microsoft can deliver stronger growth through AI and the market continues to reward it with a higher sales multiple, this tech stock could see bigger gains.

Therefore, investors who have Microsoft shares in their portfolios would do well to continue holding on to the tech giant as the company seems to have even greater growth prospects ahead of it thanks to the potential acceleration.

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has a position in and recommends Microsoft. The Motley Fool recommends the following options: long January 2026 $395 call options on Microsoft and short January 2026 $405 call options on Microsoft. The Motley Fool has a disclosure policy.