With markets hovering around all-time highs, now may be a difficult time for some growth investors to step into specific names. After all, valuations have surged to levels many investors may simply be uncomfortable with right now.
That said, there are certain key metrics growth investors can look at to ensure their core holdings have the kind of stability and upside investors are looking for. Among the key items I look at when I consider companies’ income statements and balance sheets is how much gross and net margin they’re creating. That’s because these metrics are pretty solid estimations of how well a given company is operating. Indeed, at the end of the day, valuations come down to how much cash flow or earnings a given company will generate over their remaining years in operation.
So, let’s take a look at three companies with sky-high margins I think can power through whatever is to come.
Alphabet (GOOG)
Most readers will know how bullish I’ve been on Alphabet (NASDAQ:GOOG) of late, in part due to the company’s relatively low valuation multiple when compared to its Magnificent 7 peers.
At a mid-20s price-earnings ratio for a company that generated $100 billion in revenue this past quarter (up 16% year-over-year), there’s a lot to like about how Alphabet is priced relative to its future growth potential. Indeed, I’d argue that the company’s top-line growth number probably gets disproportionate attention from investors and the market as a whole, despite the underlying reality that these revenues are highly profitable.
In fact, the company’s operating margin has expanded over the past year, surging to nearly 34% this past quarter. For a company of Alphabet’s size, with so much scalability and upside from its burgeoning cloud business (and sky-high margins continuing in search), this is a stock worth holding for the long-term. In my view, Alphabet’s robust core businesses make the AI or autonomous driving narrative around this stock palatable, as those are long-term bets. But given the impressive growth we’ve seen with Waymo and Gemini, these are also factors that shouldn’t be ignored.
I’m still very bullish on Alphabet here.
Nvidia (NVDA)
It’s really hard to talk about high-margin stocks without mentioning Nvidia (NASDAQ:NVDA). With an absolutely astounding gross margin of more than 73%, Nvidia is clearly among the most profitable tech companies. And there’s no secret as to why – with the company’s high performance chips proving to be among the most in-demand products for B2B sales we’ve seen in a long time.
The question of course is whether corporate spending levels will continue to increase at the rate they have, and if Nvidia can continue to grow it stop line at the rate it has. But with Nvidia’s revenue climbing 62% year-over-year and 22% over the past quarter alone, this is a company that rarely fails to hit the ball out of the park come earnings season.
With very profitable growth, Nvidia’s price-earnings and price-sales multiples have moved very closely in lockstep, and that’s rare to see. I’ll be watching Nvidia’s margins from here as key to its long-term investing thesis. But with plenty of robust demand in the chip market, and investors clearly clamoring for more power and performance in the world of compute, Nvidia stock should be a stellar performer in 2026 at least.
Microsoft (MSFT)
A company that got its start via selling mass market word processing and analytics tools to the market (and it still does), Microsoft (NASDAQ:MSFT) is another unsurprising name to have on this list.
Microsoft’s margins have increased by $8.1 billion (18% year-over-year) to an annualized rate around 69%. That’s truly incredible, and provides the company with some pretty deep pockets to continue to invest in its core cloud business (which by the way, provides much of this profitability).
Importantly, the company’s intelligent cloud business saw revenue surge 28% over the same quarter the year prior in Q1, as Azure revenue continues to dominate the discussion for Microsoft. With its AI copilot platform and other key growth drivers underway (and incredible pricing power for its core product suite), Microsoft looks both defensive and a high-growth long-term pick at current levels.
I think the company’s valuation multiple is relatively rich, but investors are paying for value right now. For those looking for a company as close to bullet-proof as they come, I wouldn’t ding anyone for picking Microsoft here.
Top Gaining Stocks
Top Losing Stocks
