Technology has undoubtedly been the star of Wall Street in 2024, driven by explosive growth in areas like artificial intelligence (AI). As we turn the page to 2025, the sector’s momentum shows no signs of slowing down.

In this article, I have highlighted three quality tech stocks: Microsoft Corporation (MSFT - Get Rating), Alphabet Inc. (GOOGL - Get Rating), and Cisco Systems, Inc. (CSCO - Get Rating) that one might consider buying in 2025 and hold forever. These companies are already well-known for delivering substantial investment returns and remain poised to capitalize on industry growth trends.

While the Federal Reserve’s smaller-than-expected December rate cut and hawkish outlook for 2025 dampened some hopes for a year-end rally, the technology sector remains a long-term winner. The rising demand for data-driven technologies is fueling investments in AI, cloud computing, and connectivity.

By 2030, the U.S. IT services market is anticipated to hit $695.6 billion, growing at a CAGR of 7.9%. Additionally, global IT spending is projected to grow by 8.3% this year, reaching $5.44 trillion, driven by increasing adoption of cloud solutions, cybersecurity measures, automation, and advanced data management tools.

With that in mind, let’s examine the fundamentals of the above-mentioned stocks in detail:

Microsoft Corporation (MSFT - Get Rating)

MSFT is a technology company that develops and supports software, services, devices, and solutions worldwide. The company operates through three segments: Productivity and Business Processes; Intelligent Cloud; and More Personal Computing.

On November 19, MSFT announced an expanded partnership with C3.ai, Inc. (AI - Get Rating) to accelerate the adoption of Enterprise AI on Microsoft Azure. This collaboration enhances their relationship by integrating C3 AI’s advanced application software, including C3 Generative AI, with Azure’s powerful cloud ecosystem.

Under this, MSFT became the preferred cloud provider for C3 AI solutions, while AI is now a top AI application provider on Azure. The alliance focuses on innovation, integration, and joint efforts in marketing, sales, and support to drive Enterprise AI adoption across industries, benefiting customers and stakeholders.

MSFT’s trailing-12-month levered FCF margin of 24.11% is 112.5% higher than the industry average of 11.35%. Likewise, its trailing 12-month net income margin and ROCE of 35.61% and 35.60% are considerably above their respective industry averages of 3.84% and 4.44%.

For the first quarter of 2025, which ended on September 30, 2024, MSFT’s total revenue increased 16% year-over-year to $65.59 billion. The company reported an operating income of $30.55 billion, indicating a 13.6% growth from the prior year quarter. In addition, its net income amounted to $24.67 billion and $3.30 per share, reflecting increases of 10.7% and 10.4% year-over-year, respectively.

The consensus revenue estimate of $68.86 billion for the fiscal second quarter (ended December 2024) represents an 11% increase year-over-year. The consensus EPS estimate of $3.13 for the same quarter indicates a 6.9% improvement year-over-year. The company has an excellent surprise history; it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.

The stock has gained 15.5% over the past year and 3.7% over the past three months to close the last trading session at $424.56.

MSFT’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

MSFT has a B grade for Momentum, Stability, and Quality. It is ranked #16 out of 40 stocks in the B-rated Software – Business industry. Click here to see the additional ratings for MSFT (Growth, Value, and Sentiment).

Alphabet Inc. (GOOGL - Get Rating)

GOOGL is the powerhouse behind a spectrum of tech innovations and various products and platforms worldwide. It operates through Google Services; Google Cloud; and Other Bets segments. The company is also the renowned owner of YouTube.

The stock’s trailing-12-month EBITDA margin of 36.33% is 95.1% higher than the industry average of 18.62%. Similarly, its 12.09% trailing-12-month levered FCF margin is 36.6% above the industry average of 8.86%. Also, its trailing-12-month ROCE of 32.10% compares favorably to the industry average of 4.64%.

In the fiscal third quarter, which ended on September 30, 2024, GOOGL’s revenues increased 15.1% year-over-year to $88.27 billion. Its income from operations rose 33.6% from the year-ago value to $28.52 billion. The company’s net income amounted to $26.30 billion and $2.12 per share, indicating an increase of 33.6% and 36.8% from the prior-year quarter, respectively.

Street expects GOOGL’s revenue for the fiscal fourth quarter (ended December 2024) to increase 12% year-over-year to $96.68 billion. Its EPS for the same period is expected to register a 29.3% growth from the prior year, settling at $2.12. In addition, it surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.

Over the past year, the stock has surged 42.9%, closing the last trading session at $193.95.

It’s no surprise that GOOGL has an overall rating of B, equating to a Buy in our POWR Ratings system. It also has a B grade for Sentiment and Quality. Out of 50 stocks in the A-rated Internet industry, GOOGL is ranked #15.

Beyond what is stated above, we’ve also rated GOOGL for Growth, Value, Momentum, and Stability. Get all GOOGL ratings here.

Cisco Systems, Inc. (CSCO - Get Rating)

CSCO designs manufactures, and sells Internet Protocol-based networking and other products related to the communications and information technology industry internationally. It integrates product portfolios across networking, security, collaboration, applications, and cloud.

On November 18, 2024, CSCO announced it signed a Whole Portfolio Agreement (WPA) with MGM Resorts International, a global gaming and entertainment company, to empower MGM Resorts next-generation guest experiences. In this agreement, MGM Resorts will have access to CSCO’s software portfolio and Customer Experience (CX) services for 5.5 years.

In the same month, demonstrating its commitment to returning value to shareholders, the company declared its 52nd consecutive quarterly dividend of $0.40 per common share, which will be paid on January 22, 2025.

CSCO pays an annual dividend of $1.60, which translates to a yield of 2.72% at the current share price. Its four-year average dividend yield is 3.02%. Moreover, its dividend payouts have increased at a CAGR of 2.7% over the past five years.

In terms of the trailing-12-month net income margin, CSCO’s 17.73% is 361.8% higher than the 3.84% industry average. Similarly, its 24.68% trailing-12-month levered FCF margin is 117.5% higher than the industry average of 11.35%. Also, its trailing-12-month ROCE of 20.76% compares to the industry average of 4.44%.

During the first quarter of 2025, which ended on October 26, CSCO’s total revenues were $13.84 billion, while its services’ revenue amounted to $3.73 billion, representing an increase of 5.6% from the last year. Moreover, the company’s net income for the quarter came in at $2.71 billion and $0.68 per share.

Analysts expect CSCO’s revenue for the second quarter (ending January 2025) to increase 8.4% year-over-year to $13.87 billion, while its EPS for the same period is expected to grow 4.3% from the prior year to $0.91. Moreover, it topped Street revenue and EPS estimates in each of the trailing four quarters, which is excellent.

Shares of CSCO have gained 26.9% over the past six months and 18.2% over the past year to close the last trading session at $59.20.

CSCO’s POWR Ratings reflect this robust outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.

CSCO has a B grade for Momentum, Stability, and Quality. It is ranked #16 out of 45 stocks in the B-rated Technology – Communication/Networking industry. Click here to see the other ratings of CSCO for Growth, Value, and Sentiment.

What To Do Next?

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MSFT shares . Year-to-date, MSFT has gained 0.73%, versus a 0.58% rise in the benchmark S&P 500 index during the same period.

About the Author: Shweta Kumari

Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions. More...

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