Microsoft Stock at an Attractive Entry Point: Why Now Matters for Smart Investors

Microsoft’s recent market pullback presents a compelling opportunity for investors seeking quality tech exposure. Following the company’s fiscal 2026 second-quarter earnings announcement (period ending December 31, 2025), the stock experienced a notable decline despite delivering solid results. This disconnect between performance and market reaction creates what savvy investors recognize as a genuine dip—a moment when quality assets trade below their intrinsic value.

Over the past five years, Microsoft has been among the top-performing tech stocks, with returns reaching approximately 85.5% before the recent downturn—still competitive against the S&P 500’s 87% return. However, the stock’s current valuation tells a more interesting story about the opportunities available today.

The Valuation Angle: Why Microsoft Trades Below Historical Averages

The immediate reason to consider Microsoft during this dip lies in its valuation metrics. The stock now trades at less than 26 times forward earnings—a level rarely seen over the previous three years. This represents a significant pullback from the premium valuations the market has historically assigned to the company.

What makes this situation noteworthy is that nothing fundamentally changed in Microsoft’s business thesis following the earnings release. The company still maintains top-tier execution capabilities and a strong growth trajectory, yet the market repriced the stock downward by approximately 10%. When quality companies trade at discounts unrelated to their underlying business performance, it often signals market overreaction—creating an ideal entry point for patient investors.

Microsoft’s remaining performance obligations in its Azure business alone total $625 billion, representing substantial contracted revenue and growth potential across multiple years.

Azure’s Cloud Computing Engine: The Core Growth Driver

Azure remains the backbone of Microsoft’s investment thesis. The cloud computing platform continues to benefit significantly from enterprise spending on artificial intelligence infrastructure, enabling clients to access computing power necessary for training and deploying AI models.

In the recent quarter, Azure revenue expanded 39% year-over-year, surpassing management’s own 37% guidance for the subsequent period. This outperformance demonstrates that the cloud business continues accelerating despite market concerns about saturation or competitive pressure. The fact that management exceeded internal expectations yet the stock still experienced selling pressure underscores how irrational market pricing can become—presenting a classic buying opportunity when sentiment disconnects from fundamentals.

Beyond the immediate growth numbers, Azure’s $625 billion in remaining performance obligations ensures that this division will continue driving shareholder value for years to come, particularly as the AI race remains in its early stages.

OpenAI Investment: A Strategic Bonus Play

Microsoft’s approximately 27% stake in OpenAI represents another dimension of value that investors often overlook. While various generative AI models are available through Azure, Microsoft strategically encourages enterprise customers to utilize ChatGPT, OpenAI’s flagship product. This arrangement gives Microsoft significant exposure to one of the most valuable AI companies in existence.

Recent market speculation suggests OpenAI may pursue an initial public offering later this year. Should that occur, Microsoft’s position could enable the company to realize substantial returns on its investment—essentially providing investors a backdoor method to participate in OpenAI’s valuation growth. Until then, this stake continues to appreciate as OpenAI itself grows in value and adoption.

The Investment Decision: Capturing Opportunity at the Right Time

History demonstrates that Microsoft’s stock rarely experiences meaningful price declines. When such moments occur, they typically signal intelligent entry opportunities rather than reasons for concern. The current situation checks multiple boxes: reasonable valuation, uncompromised business fundamentals, and accelerating growth in core segments.

The recent dip represents exactly the type of market anomaly that creates wealth-building opportunities for disciplined investors. Microsoft’s resilient business model, combined with its exposure to the multi-trillion-dollar AI transformation through Azure and OpenAI, positions it well for long-term appreciation. Rather than following the crowd during market volatility, this may be the moment to consider establishing or expanding a position in this quality technology company.