Microsoft (MSFT) Stock Is the Cheapest It’s Been in Over 10 Years – Time to Buy?

TLDR

• MSFT is down ~28% from its July peak, shedding roughly $1 trillion in market cap
• The stock now trades at a forward P/E of ~22x — below the S&P 500 average, a rare valuation for Microsoft
• Azure cloud revenue grew 39% last quarter, and growth was limited only by data center capacity
• Microsoft holds an OpenAI stake potentially worth over $200 billion after OpenAI’s $840B valuation
• Analysts say AI is likely to work with Microsoft’s software, not replace it — softening the “software apocalypse” narrative

Microsoft (MSFT) stock is sitting at its cheapest valuation relative to the S&P 500 in over a decade, down around 28% from its July 2024 peak of $555 a share. The selloff has wiped out roughly $1 trillion in market cap, leaving the stock trading near $401.

Microsoft Corporation, MSFT

The drop has been driven by fears that artificial intelligence could gut the value of business software — a narrative the market has labeled the “software apocalypse.” The concern centers on AI agents, which can automate tasks that companies currently pay for via software subscriptions.

But the numbers behind Microsoft’s business tell a different story.

For its fiscal Q2 2026 (ended December 31), Microsoft posted revenue of $81.3 billion — beating its own guidance range of $79.5–$80.6 billion. Revenue grew 17% year over year. Earnings per share for the full fiscal year are forecast to rise 21%, to $16.48.

Azure Is the Growth Engine

The standout in that quarter was Azure, Microsoft’s cloud platform, which grew 39%. The company said growth would have been even higher, but it ran short on data center capacity. To fix that, Microsoft is planning to spend over $100 billion in capital expenditures this fiscal year.

That kind of growth doesn’t come from a company being disrupted — it comes from one sitting at the center of AI demand. Every AI agent and large language model needs cloud computing to run, which means Azure benefits whether or not AI eventually hurts Microsoft’s software business.

Microsoft’s Intelligent Cloud segment is on track to overtake its software business as the company’s largest revenue source.

The OpenAI Factor

Then there’s OpenAI. Microsoft committed $13 billion to the AI startup over several years, mostly in Azure credits. OpenAI’s latest funding round valued it at $840 billion. Microsoft’s stake has been diluted, but analysts estimate it could be worth more than $200 billion.

If OpenAI holds its position as the leading AI company, Microsoft would be its largest shareholder.

The “software apocalypse” narrative also took a hit recently. Anthropic, seen as a key player in the AI agent space, gave a business presentation that showed agents working alongside tools like Excel and PowerPoint — not replacing them. The iShares software ETF recovered some losses after that, and MSFT rose 5% in the days following.

Microsoft 365 Copilot, its $30/month AI assistant, now has 15 million paying users — 3% of its installed base. The adoption is slow, which is consistent with how Microsoft has historically rolled out new products. It was late to cloud too, before becoming the No. 2 cloud provider behind AWS.

The forward P/E of around 22x puts Microsoft below Coca-Cola, Home Depot, and Colgate-Palmolive. The last time MSFT traded at this valuation — January 2023 — the stock went on to gain 73% over the next 12 months.

RBC analyst Rishi Jaluria has called the stock “very undervalued,” citing Microsoft’s position across Azure, security, data, LinkedIn, and gaming. Melius Research analyst Ben Reitzes recently downgraded to Neutral but acknowledged much of the bear case may already be priced in.

Microsoft’s Productivity & Business Processes segment — which houses Microsoft 365, other business software, and LinkedIn — generated $67 billion in revenue in the first half of fiscal 2026, growing 16%.

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