The stock market is always going to experience occasional dips, but stocks of profitable and growing companies are always going to be a relatively safe course to build lasting wealth. Here are two solid businesses with excellent growth prospects to buy now.
Microsoft (NASDAQ: MSFT) is a great stock to buy for its strong brand, massive profitability, and nimble growth strategy that can adapt quickly to new opportunities. It responded quickly to the artificial intelligence (AI) trends taking over the enterprise space last year, and it’s translating to strong business momentum.
Microsoft is a no-brainer for almost any market environment because of its lucrative subscription-based business model. Investors can sleep well at night knowing they hold shares in a business that provides essential software for students and working professionals and has the financial fortitude to invest in growth and pay regular dividends.
Over the last year, Microsoft generated $88 billion in net profit on $245 billion of revenue, and it distributed a quarter of its profit to shareholders in dividends, bringing its trailing yield to 0.72%.
Those financial resources have allowed Microsoft to get ahead of competitors in AI. While Apple is preparing to make its AI debut with Apple Intelligence, Microsoft announced Copilot, a generative AI-powered assistant, early in 2023, which has brought major enhancements to Office, Windows, and other enterprise software services.
More companies continue adopting Copilot. In the June-ending quarter, the number of Copilot customers grew 60% over the previous quarter. The feedback so far has been outstanding for Microsoft, with companies continuing to come back and add more employees to the service.
The momentum across Microsoft’s business is driving solid growth, with revenue up 15% year over year last quarter. Accelerated investment in AI infrastructure may cause some pressure on margins in the near term, but it’s paving the way for potentially significant growth over the long term.
Wall Street analysts expect Microsoft’s earnings to grow 13% per year over the next several years, which should support satisfactory returns for long-term investors.
Netflix (NASDAQ: NFLX) is another profitable business that is enjoying momentum right now. Despite several new streaming services that have launched in recent years, Netflix continues to be the runaway leader with 277 million subscribers globally.
Netflix generated $7 billion in net profit on $36 billion of revenue over the last year. That translates to a high profit margin of 20%, and it is achieving superior margins while spending billions every year on new films and series.
Netflix has become a destination for top filmmakers and studios to produce blockbuster content, and this should continue to drive gains for years to come. There are more than 1 billion broadband internet subscriptions worldwide, which gives Netflix a lot of room to grow.
One strategy Netflix uses to attract new members is producing localized content that appeals to different cultures. India is one of Netflix’s biggest growth markets right now. It recently got a boost from the hit series Heeramandi: The Diamond Bazaar and Amar Singh Chamkila. This shows how Netflix’s profitability is funding a large content budget that can cast a wide net for more subscribers.
Global paid subscriptions grew 16% year over year in the second quarter, driven by a strong slate of new content and management’s efforts to stop password sharing. It won’t always grow subscribers at high rates, but Netflix can still fuel shareholder returns by increasing its profit margin and growing earnings per share.
Wall Street analysts expect Netflix’s earnings to grow 28% on an annualized basis over the next several years. As Netflix continues to pump out new content and grow subscribers, investors can expect the stock to be worth considerably more in another 10 years than it is today.
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John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, and Netflix. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
2 Top Tech Stocks to Buy Right Now was originally published by The Motley Fool
