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Microsoft is set to make significant investments in AI infrastructure this year, and with good reason. The company’s cloud computing division Azure has experienced impressive growth in AI, with a revenue increase of 33% last quarter and a doubling of Azure OpenAI usage in the past six months. Azure operates on a consumption model, enabling customers to leverage its services to develop their own AI solutions and applications, leading to increased usage of its data and analytics services.
Despite strong growth, Azure faces capacity constraints that have hampered its full potential. The company projects that Azure revenue will pick up in the second half of the fiscal year as additional capacity from previous capital expenditures comes online. Microsoft is also heavily investing in expanding data centers worldwide to meet growing demand.
Beyond cloud computing, Microsoft sees a significant opportunity in AI software, particularly with its AI assistant copilots for the Microsoft 365 suite. Priced at $30 per month per enterprise user, these AI copilots help streamline tasks such as email organization, creating PowerPoint presentations using natural language, and utilizing Python in Excel through natural language commands. These AI copilots are expected to drive further growth for the company.
With a current P/E ratio of 32.5 based on fiscal year estimates, Microsoft’s stock is considered reasonably valued.
Salesforce aims to lead the way in agentic AI, the next phase of AI development beyond generative AI. While generative AI allows users to create content by providing prompts, agentic AI takes it further by autonomously completing tasks such as booking flights, hotels, and reservations based on a prompt.
As a leader in customer relationship management (CRM) software, Salesforce introduced its agentic AI platform, Agentforce, in October, with an updated version in December. The platform offers pre-built agents that users can customize using no-code and low-code tools, while also allowing customers to create agents from scratch. These agents cover various areas including sales, marketing, recruiting, and customer service.
Salesforce has seen rapid adoption of Agentforce, closing 200 teams in early December and over 1,000 by mid-December. The company aims to have 1 billion Agentforce AI agents deployed by the end of fiscal 2026. Priced at $2 per conversation, Agentforce presents a significant growth opportunity for Salesforce.
The stock is currently trading at 29 times fiscal 2026 earnings and has a PEG ratio of 0.8.
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