It's not often that a major tech stock can be declared a "once-in-a-decade" opportunity, but that's what Microsoft (MSFT 2.55%) stock looks like now. By some valuation measures, this is the cheapest it has been in a decade, yet the company is producing incredible results and thriving in the artificial intelligence (AI) era. This combination makes for a stock that's well worth buying now.
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Microsoft's valuation decline is noteworthy
Microsoft has been thriving in the AI build-out. Its cloud computing platform, Azure, has become one of the top places to build, run, and train AI models and applications. Being a major player in the cloud computing arena isn't easy, as the competition is stiff. But Microsoft's product cements it as one of the top companies in this sector, and its 40% Azure revenue growth rate is evidence of that.
The tech giant also let investors know that its AI business crossed a $37 billion annual run rate, growing at 123% year over year. That's a huge business growing quickly, and investors should appreciate the growth rate and size of Microsoft's AI business.
NASDAQ: MSFT
Key Data Points
Overall, Microsoft is growing its revenue at a healthy 18% pace, and with massive AI demand ahead, that fact doesn't look to be changing. Next quarter (Q4 of its fiscal 2026, ending June 30), Wall Street analysts estimate 15% growth. For fiscal 2027, they expect 17% growth. With Microsoft's size and maturity, investors can't ask for too much more. Furthermore, that's about the same results as the past five years, so why has Microsoft's stock declined so much?
That's a great question, and I think it points to how much of a buying opportunity Microsoft is. There isn't an obvious reason why Microsoft's stock has declined, and I think it's just a case of the market mispricing a stock. For Microsoft, cash from operations is the best way to value the stock, as it ignores investment gains and other one-time costs and focuses on the cash flow.
MSFT Price to CFO Per Share (TTM) data by YCharts
You have to rewind to about 2018 to find a time when Microsoft's stock was this cheap. For the rest of the decade, Microsoft traded in the mid- to upper 20s. I see no reason why it shouldn't be trading there now, and this could result in a solid return if investors buy Microsoft's stock now and the stock returns to those normal valuation ranges.
I think it's an excellent time to buy Microsoft stock, as the market has mispriced a solid AI stock pick.
