Microsoft

Microsoft’s business is highly predictable, characterized by steady growth and a large base of recurring revenue. Over the past decade, the company has delivered consistent revenue increases of roughly low-to-mid teens percent annually, with FY2025 revenue reaching $281.7 billion (up 15%)).

Much of this growth is organic and subscription-driven: for instance, Office 365 and Azure contracts are often multi-year agreements providing continuous revenue streams.

The company is akin to a "tollbooth" on global IT spending – businesses large and small reliably pay for Windows licenses, cloud services, and productivity software year after year. Importantly, Microsoft is aligned with powerful secular trends rather than cyclical headwinds.

Its key segments (cloud computing, enterprise software, digital productivity, even gaming) are generally growing markets, providing a rising tide for future revenue. Azure, for example, saw 39% YoY growth in the latest quarter as companies expand their use of cloud and AI workloads.

Microsoft’s diversified portfolio also enhances stability: when one area slows (such as PC-related revenue during a PC shipment downturn), another (like cloud or LinkedIn services) often accelerates, smoothing overall results. The company’s earnings and free cash flow have a reliable upward trajectory not prone to wild swings.

We also take comfort in Microsoft’s geographic and customer diversification – no single country or client makes up an outsized portion of revenue, and its exposure to volatile emerging markets is limited. This reduces geopolitical or regulatory unpredictability.

While technology evolves quickly, Microsoft has shown an ability to adapt (e.g. embracing cloud, AI) rather than be disrupted. There is some regulatory risk (antitrust scrutiny), but so far Microsoft has navigated it better than peers by being proactive and cooperative.

In sum, this is a business with recurring demand and long-term tech tailwinds, giving us a high degree of confidence in its future cash flow generation.