Is it a Good Time to Buy Microsoft Stock?

Investors should consider dollar-cost averaging rather than lump-sum purchases, focusing on Microsoft’s long-term compounding potential rather than short-term valuation metrics. Microsoft’s 0.72% dividend yield ranks below the tech sector average (1.35%), but this surface comparison misses crucial metrics. Microsoft has increased dividends for 21 consecutive years with a 10-year CAGR of 10.3% — significantly outpacing inflation and peer growth rates. The company maintains a conservative 31.4% payout ratio, retaining capital for growth initiatives while still returning $20.7 billion annually to shareholders through dividends. This balanced approach creates superior total return potential compared to both higher-yield/lower-growth tech stocks and zero-yield growth companies.

NASDAQ: MSFT

However, management has previously said that it will slow down the pace of its capex growth in Fiscal 2026. Microsoft’s dividend growth warrants investor attention despite its modest 0.72% current yield. Microsoft’s $13 billion investment in OpenAI (securing 49% of commercial benefits) and $2.9 billion in additional AI infrastructure has secured the company’s leadership in enterprise AI adoption. Microsoft stock has maintained record-breaking performance over multiple years as one of the world’s prominent technology companies. This company maintains its position as one of the largest entities in global technology markets.

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• Its revenue and operating income both increased 15% year over year, which is impressive for a company of its size.
• Bank of America analysts wrote in a note last week that an increase to Microsoft’s capex guidance could give the stock a post-earnings boost.
• A move of that size off of Tuesday’s close would put shares at about $565, an all-time closing high, or about $519, erasing their gains from the last week.

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Our examination focuses on Microsoft’s performance metrics alongside its business expansion prospects and current market standing. A stock trading at a high valuation means that investors will have high expectations for future growth. And if that doesn’t end up being the case, it could lead to a correction. For now, investors appear to be content with the stock’s growth rate of around 18%, but it wasn’t all that long ago that it was in the low-single digits.

The stock is trading at a big premium

Microsoft’s AI products command 42% higher ASPs than standard offerings with 3.8x faster adoption rates. Quantitatively, AI services should deliver 38% of Microsoft’s projected earnings growth through 2027, potentially adding $35-40 billion in annual revenue at 65-70% margins — the highest-quality growth in Microsoft’s product portfolio. For long-term investors, Microsoft represents a foundational technology holding that balances above-market growth potential with below-sector volatility – delivering a 0.91 beta despite its high-growth profile. At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors.

Competitive Challenges and Risk Factors

This $49.1 billion net cash position represents a $11.23 per share “cash cushion” completely excluded from typical valuation multiples. Technical analysts using Pocket Option’s momentum indicators frequently identify Azure’s quarterly performance announcements as share price catalysts generating 72% higher than average trading volumes. The predictable recurring revenue from Azure’s consumption-based model provides earnings stability valued by institutional investors during economically uncertain periods. Microsoft’s recent earnings exceeded expectations, driving up analyst price targets and prompting upgrades. Analysts are particularly bullish on Microsoft’s cloud computing segment, with some projecting significant revenue growth over the next few years, thanks in large part to the company’s role in artificial intelligence (AI). Determining if Microsoft (MSFT) warrants allocation in your portfolio demands analysis beyond surface-level performance metrics.

For fiscal 2026, 10 analysts revised their earnings estimate upwards in the last 60 days, and the Zacks Consensus Estimate has increased $0.18 to $15.53 per share. The stock is trading well above critical moving averages (such as the 50-day and 200-day), which is a sign of strong bullish momentum. Day traders might see this as a show of muscles, but it indicates the stock could be a bit “overbought” in the short term. Microsoft stock has risen nearly 29% since the start of the year, but shares have been treading water since jumping to a record high after its July earnings report. Economic uncertainty weighed on shares throughout the first few months of the year before a string of trade deals and optimism about artificial intelligence helped lift shares into the summer.

Microsoft controls significant leadership positions in cloud computing, software solutions, and AI capabilities. In 2023, Microsoft generated $232 billion in revenue, a 10% increase over the prior year. Microsoft (MSFT 0.97%) has routinely been one of the most valuable companies in the world.

Microsoft (MSFT) is scheduled to report quarterly results after markets close on Wednesday, and some investors expect the stock to jump to a fresh record. Using TipRanks’ Options tool, we can see what options traders are expecting from the stock immediately after its earnings report. The expected earnings move is determined by calculating the at-the-money straddle of the options closest to expiration after the earnings announcement. If this sounds complicated, don’t worry, the Options tool does this for you. Indeed, it currently says that options traders are expecting a 4.1% move in either direction. Unfortunately, for investors looking for an undervalued gem, Microsoft doesn’t fit that definition.

Utilizing ratios like P/E, PEG, Price/Sales, Price/Cash Flow, and many other multiples, the Value Style Score identifies the most attractive and most discounted stocks. If the AI market stalls or fails to provide a rapid return, these investments could damage earnings. The chart above points toward an increase of 14% and 17% in Microsoft’s earnings over the next two fiscal years. That’s why it may be a good idea to buy this stock following its recent pullback, as it is trading at 33 times earnings right now, which is in line with the tech-laden Nasdaq-100 index’s earnings multiple. However, keep in mind that some investors are concerned that Microsoft’s stock price has risen rapidly, leading to a potentially expensive valuation. GOBankingRates’ editorial team is committed to bringing you unbiased reviews and information.

The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities. Earlier this month, Microsoft said it’ll lay off roughly 9,000 employees, approximately 4 percent of its total headcount. This is all part of an internal restructuring to pivot resources to AI, but news like this can concern investors about near-term cost headwinds. Microsoft has invested roughly $80 billion to construct additional data centers for AI.

Microsoft trades at a 26.1% premium to tech sector averages with a forward P/E of 37.2x versus the S&P 500’s 22.1x. This premium is justified by Microsoft’s industry-leading 38.7% profit is microsoft a good stock to buy margins, consistent revenue growth of 16.8% despite its $200B+ scale, and 33.4% return on invested capital. DCF analysis indicates a fair value range of $ , suggesting current pricing ($400) represents full valuation rather than excessive premium.

• As of Sept. 5, it’s down over 12% since hitting an all-time high on July 5.
• This company maintains its position as one of the largest entities in global technology markets.
• We use data-driven methodologies to evaluate financial products and services – our reviews and ratings are not influenced by advertisers.
• Its valuation (by market capitalization) has almost tripled in the last three years, and it now sits in the $3 trillion club, with Apple being the only other member at the moment.
• The expected earnings move is determined by calculating the at-the-money straddle of the options closest to expiration after the earnings announcement.

Its earnings per share (EPS) came in at $2.95, beating analysts’ estimates. Microsoft predicts future revenue growth will increase because their products now feature AI integration. Microsoft stands to gain from the projected $1.8 trillion value expansion of the AI market until 2030. The tech stocks industry is changing due to the emergence of Artificial Intelligence (AI). Microsoft made significant financial investments in AI through its collaboration with OpenAI. This strategic move helps the company position itself better within the intense AI market.