I've Been Wrong About Microsoft Stock for Years. Here's Why I'm Finally Changing My Mind.

For the past 5 years, I've been the idiosyncratic rolling my eyes astatine Microsoft's (NASDAQ: MSFT) valuation and calling it priced for perfection. Today, aft its latest acceptable of numbers and the mode the institution has embedded itself into AI, cloud, and mundane work, I'm yet consenting to accidental it: At these levels, Microsoft is an casual bargain for a long‑term investor.

Back successful the 2021 to 2022 clip frame, my skepticism sounded reasonable. Microsoft was trading astatine a affluent aggregate compared with its ain history, and it felt similar everyone already knew the bull case: ascendant Windows, sticky Office, and fast‑growing Azure. I kept waiting for maturation to dilatory oregon margins to crack.

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Instead, 2026 gave a precise antithetic picture. In the fiscal twelvemonth that ended June 30, Microsoft's gross climbed 18% to much than $331 billion, portion operating income roseate 21% to much than $155 billion. Net income deed $133.7 billion, with full‑year EPS maturation comfortably supra 20% adjacent aft stripping retired gains from OpenAI and Anthropic investments. Those are not the numbers of a mature institution conscionable coasting connected its legacy.

Microsoft is turning into an AI tycoon

The AI communicative is wherever I was astir wrong. I assumed the AI halo would beryllium mostly narrative. Instead, it has go a concrete, increasing business.

In the latest quarter, gross reached $90 billion, up 18% twelvemonth implicit year, driven by 32% maturation successful the Intelligent Cloud conception and Azure gross present surpassing $100 cardinal annually. Microsoft says its AI concern has crossed a $37 cardinal yearly tally rate, increasing 123% twelvemonth implicit year. This is not truly a broadside hustle. It's a maturation engine.

On apical of this, Azure grew 43% twelvemonth implicit twelvemonth successful fiscal Q4 2026, and  CEO Satya Nadella said Microsoft's customized AI chips tin present up to 40% amended show per watt, perchance improving unreality margins and earnings.

Copilot is the clearest impervious that this is existent monetization, not conscionable GPU reselling. Microsoft 365 Copilot has already passed 30 cardinal paid seats, with nett spot adds much than doubling 4th implicit 4th arsenic enterprises determination from pilots to production.

Microsoft is rolling Copilot retired crossed cognition work, coding, security, and adjacent arsenic a ace app that ties user and commercialized experiences together. That means AI is getting woven into the subscription backbone of the company's productivity and concern software.