Can investing $10,000 in Microsoft make you a millionaire?

Microsoft (NASDAQ:MSFT) was one of the best stocks on the market over the past decade. Buying and holding shares of this tech giant during that period helped investors enjoy market-beating gains.

More specifically, Microsoft stock has delivered an annualized rate of return of nearly 27% over the past 10 years, assuming the company’s dividends were reinvested. By comparison, S&P500 The index’s annualized return over the past decade is 13% (assuming dividends were reinvested). So, if you bought $10,000 worth of Microsoft stock a decade ago, your investment would now be worth $107,950.

Microsoft has proven to be an ideal investment for those looking to build a million-dollar portfolio over the past decade. Assuming you had invested a larger amount — say $100,000 — in the stock 10 years ago, you would be a millionaire today just by buying Microsoft.

But, as they say, past performance is no guarantee of future profits. Will Microsoft maintain its impressive momentum over the Next decade and contribute to a diversified portfolio worth millions of dollars?

Microsoft’s growth is accelerating

Microsoft reported its results for fiscal 2024 (which ended June 30) in late July. The company ended the fiscal year with revenue of $245 billion, up 16% compared to fiscal 2023. Microsoft’s net income was $88 billion, up 20% on a non-GAAP basis.

For comparison, Microsoft’s revenue in fiscal 2014 was $86.6 billion, while its net income at the time was $22 billion. So the tech giant’s revenue has nearly tripled over the past decade, while its net income has quadrupled. Specifically, Microsoft’s top line has achieved a compound annual growth rate (CAGR) of nearly 11% over the past decade. The company’s profits have achieved a faster CAGR of 15% during that period.

Microsoft is a much bigger company than it was a decade ago. It now has a market capitalization of $3.2 trillion, making it the world’s second-largest company. So expecting Microsoft stock to grow at least tenfold over the next decade seems a bit far-fetched, considering the global economy alone was worth an estimated $105 trillion last year.

Microsoft’s valuation suggests that it contributes less than 3% to the global economy. So, if Microsoft becomes a $30 trillion-plus company, the global economy will have to grow at a much faster rate over the next 10 years, or Microsoft will end up controlling a huge portion of the world’s gross domestic product (GDP). The larger a company becomes, the harder it is to maintain that growth rate.

The story continues

Yet Microsoft’s growth in the previous fiscal year was higher than the average growth rate the company has seen in the past decade. What’s more, the company’s revenue growth is expected to remain solid over the next three fiscal years, and the chart below indicates that analysts expect growth to accelerate.

A similar trend can be expected with respect to the company’s financial results.

Lucrative target markets could help Microsoft maintain impressive growth

Analysts expect Microsoft’s growth profile to improve because the company is serving a much larger addressable market than it did a decade ago. At the time, the company’s cloud business was in its infancy, and Microsoft said its commercial cloud revenues reached an annualized revenue run rate of $4.4 billion in the fourth quarter of fiscal 2014.

Microsoft’s business has been based on selling consumer devices such as the Xbox gaming console and Surface tablets, and the tech giant has also tried its hand at smartphones after acquiring Nokiadevices and services. Of course, Microsoft’s Windows business also contributed significantly to its revenues.

A closer look at Microsoft’s business segments will show that the company is tapping into several lucrative growth opportunities. For example, the cloud computing industry is expected to generate as much as $2 trillion in annual revenue by 2030, according to analysts at the company. Goldman Sachsdriven by the growing adoption of generative artificial intelligence (AI).

The investment bank points out that the cloud computing market achieved a CAGR of 26% between 2019 and 2023, reaching $496 billion. This means that the size of the market is expected to quadruple by the end of the decade, which puts Microsoft in a position to maintain solid growth levels. This is because Microsoft is the second-largest player in the cloud infrastructure market with a 20% market share (it should also be noted that its share increased by 2 percentage points year-over-year in calendar Q2).

Microsoft generated $105 billion in cloud revenue in fiscal 2024, which is 43% of its revenue. So, if the company manages to maintain a 20% share of this market in 2030, its cloud revenue could reach $400 billion, or even more, if it manages to capture a larger share of this space.

Add in other catalysts, such as the growing market for cloud-based office productivity software, which Microsoft is targeting with AI-focused tools, and it’s easy to see the company has a bright future. Specifically, the cloud-based office productivity software market is expected to generate $128 billion in revenue in 2030, growing at a compound annual rate of 28%.

These massive addressable markets are why Microsoft could exceed the $500 billion revenue goal that CEO Satya Nadella has set for the company by fiscal 2030. Assuming Microsoft hits $500 billion in revenue in fiscal 2030 and trades at 11.2 times sales at that time (based on a five-year average price-to-sales ratio), the company’s market capitalization could rise to $5.6 trillion.

That would be a 75% improvement from current levels, but don’t be surprised if this tech stock delivers higher returns as it’s likely capable of faster growth.

So, Microsoft looks like it’s well-positioned to deliver significant returns to investors by the end of the decade. It’s worth noting that Microsoft just increased its quarterly dividend by 10% to $0.83 per share, which translates to a forward dividend yield of 0.76%.

Investors looking to build a million-dollar portfolio might consider investing $10,000 in cash (after paying bills, paying off high-interest debt, and saving enough for a rainy day) in Microsoft stock, as it seems set up for greater long-term growth. It may not make you a millionaire in the next decade, but it will do its fair share toward that goal.

Is it worth investing $1,000 in Microsoft now?

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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends The Goldman Sachs Group and 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.

Could Investing $10,000 in Microsoft Make You a Millionaire? was originally published by The Motley Fool