AI is expected to drive productivity gains in the long run, and investors can take advantage of the trend with the help of this tech giant.
The adoption of artificial intelligence (AI) is gaining momentum across multiple industries, which is surprising as the technology has the potential to improve productivity and contribute significantly to the global economy in the long run. Not.
McKinsey estimates that generative AI has the potential to increase labor productivity by 0.1% to 0.6% annually through 2040. Meanwhile, PwC predicts that AI will contribute $15.7 trillion to the global economy by 2030, of which $6.6 trillion is expected to continue. Consider productivity gains. Therefore, investors would do well to invest in companies that leverage AI to improve productivity.
microsoft (MSFT 1.69%) is one of the companies using AI to improve productivity, so it may be a good idea to buy now and hold for the long term. Let's take a closer look at why.
Microsoft's AI-powered productivity tools are seeing strong demand
Microsoft is leveraging its partnership with OpenAI to improve workplace collaboration tools and increase productivity. Last year, the tech giant introduced Microsoft 365 Copilot, a solution that leverages large-scale language models (LLMs) built into popular applications such as Word, Excel, PowerPoint, Outlook, and Teams.
From enabling users to create presentations in PowerPoint with text prompts, to analyzing data in Excel sheets, to creating drafts in Word, Copilot can improve productivity in a variety of ways. For example, Microsoft claims that developers using his Copilot on GitHub have increased their productivity by 88%. The good news for Microsoft investors is that the company has already started monetizing his Copilot.
Users can purchase a Copilot for Microsoft 365 subscription for $30 per month. More importantly, as Microsoft executives said during the company's recent earnings call, users are willing to pay for this service. For example, at Microsoft his 1.8 million developers pay for his GitHub Copilot. The company has been adding paid developers to the platform at an impressive pace, and the number of GitHub Copilot users surged 35% in Q3 2024.
Microsoft notes that it is seeing “increasing adoption from businesses across all industries.” Itau, Lufthansa System, nokia, pinterestand volvo Even better, the company says that existing customers have increased their use of GitHub Copilot “as they see improvements in productivity and code quality.” CEO Satyanadera said in his latest earnings call:
This quarter, we made Copilot available to organizations of all types and sizes, from large enterprises to small businesses. Today, nearly 60% of Fortune 500 companies use Copilot, and adoption is accelerating across industries and geographies in companies including: amgen, blood pressure, It has recognizedKoch Industries, Moody's, novo nordisk, NvidiaTech Mahindra has purchased over 10,000 seats.
As a result, Microsoft has seen healthy growth in its productivity and business processes sector, with revenue reaching $19.6 billion last quarter, up 12% year over year. Office 365 Commercial revenue increased 15% due to his 8% increase in the number of paid users.
Additionally, Microsoft is targeting the lucrative customer relationship management (CRM) and enterprise resource planning (ERP) markets as well as Dynamics 365 Copilot. Microsoft claims the solution allows companies to reduce the amount of time employees spend on administrative tasks such as answering emails and creating meeting summaries.
Additionally, Dynamics 365 Copilot can be deployed across multiple applications, from supply chain to e-commerce, digital marketing, and customer service. Demand for this product is growing steadily, as evidenced by the fact that Microsoft recorded a 23% growth in Dynamics 365 revenue last quarter.
As such, Microsoft is pulling the right strings to ensure AI tools are used to improve productivity, which could open up significant long-term growth opportunities for the company.
More reasons to buy stocks
AI-based productivity tools are just one way Microsoft is leveraging this technology to drive growth. The company's cloud business is also growing significantly thanks to AI. Microsoft's Azure revenue increased 31% last quarter, which exceeded the company's expectations. Microsoft noted that AI drove growth in its cloud business by 7 percentage points, exceeding the 6 percentage point growth added in the second quarter of fiscal 2024.
For comparison, Microsoft's Azure cloud revenue increased 27% year-over-year. This is a clear indication that the demand for AI-based cloud services is indeed providing a significant tailwind for the company. Again, this is another market with immense growth potential that could accelerate Microsoft's growth in the long term.
Overall, Microsoft is leveraging AI adoption in a variety of ways and is seeing tangible benefits, as its financials show. Investors looking to buy AI stocks should consider buying Microsoft immediately. The company's expected profit multiple of 30x is Nasdaq-100earnings multiple (using the index as a proxy for tech stocks).
Harsh Chauhan has no position in any stocks mentioned. The Motley Fool has positions in and recommends BP, Microsoft, Moody's, Nvidia, and Pinterest. The Motley Fool recommends Amgen, Cognizant Technology Solutions, and Novo Nordisk and recommends the following options: His January 2026 $395 long call on Microsoft and his January 2026 $405 short call on Microsoft. The Motley Fool has a disclosure policy.
