To The Moon

$Microsoft(MSFT)$ While it hasn't surged in this wave of semiconductor FOMO, it perfectly embodies the old adage: "A journey of a thousand miles begins with a single step." Recent Microsoft research offers eye-opening insights from direct feedback of 300 CIOs. The standout data lies in software spending: 2025 IT budgets remain steady at +3.6%, with software leading the charge at +3.8%; the 2026 outlook shows overall budgets accelerating slightly to +3.8%, and software to +3.9%. Microsoft's steady, "slow-burner" growth—averaging +4.1% over the past decade—hits the sweet spot.

For MSFT, the biggest prize is GenAI.

AI/ML remains firmly atop CIOs' priority list, with hyperscalers emerging as preferred partners and Microsoft leading the pack. Research indicates that by 2025, 33% of CIOs are betting on Microsoft to capture the largest share of GenAI growth ( $Amazon.com(AMZN)$ follows at 14%, $Alphabet(GOOG)$ at 10%), widening to 37% within three to five years. Why?

In short, Microsoft's trump cards are fourfold: First, it focuses on CIOs' top priorities—AI, security, and digital transformation. Second, it offers deep ecosystem integration with seamless transitions from Office to Azure. Third, its broad product portfolio spans the entire value chain from Copilot to Dynamics 365. Fourth, it pours massive investments into AI infrastructure, prioritizing enterprise clients to achieve sky-high long-term LTV (Lifetime Value). No wonder surveys show Microsoft as the top winner in IT wallet share: a net gain of +42% by 2025 (Amazon at +12%), and a 42% share within three to five years (Salesforce at just 6%).

Cloud spending further bolsters Microsoft's position. Public cloud expenditures will moderate slightly in 2024 (Azure +12.7%), but Azure is projected to surge by 21.4% in 2025, outpacing AWS's 14.2% and GCP's 9.9%. CIOs openly state that Azure reigns supreme among hyperscalers in growth—Microsoft reaps the most benefits as workloads migrate to the cloud. What about GenAI spending specifically? Microsoft anticipates a 15% increase, while Amazon/Salesforce/OpenAI are tied at 10%. Regarding AI agent strategies, Microsoft leads with 27% adoption, followed by Amazon at 17%, while Google/Salesforce/ServiceNow trail at the bottom of the long tail.

Within the product line, the Teams family continues to dominate. For project/task management, 62% of CIOs use Teams/Planner (up from 55% last year), while Project and others account for 36%. Standardization rates rose to 61% (up from 55% last year), with Microsoft capturing 32%. UCaaS transformation? Teams is the primary driver (31%), holding 49% of the UCC/voice market share. During upgrades, 44% choose Teams. UC specialists (like RingCentral) show slight recovery, but the overall ecosystem's stickiness remains remarkably strong.

In terms of valuation, Microsoft remains the "affordable cloud." Currently trading at <26x CY27 GAAP EPS, it significantly trails the broader software sector's 33x non-GAAP multiple. Consider this: Microsoft's decision to pass on OpenAI's $30 billion contract proves a masterstroke in the long run. With surging enterprise demand and limited resources, prioritizing high-value customers first ensures a robust economic model.

Overall, Microsoft's GenAI narrative isn't a bubble—it's a real-deal market share game. Betting on AI means betting on this "momentum investment"—where tangible growth lies hidden within vague aspirations. Microsoft isn't just selling tools; it's reshaping the very DNA of enterprises.