1 No-Brainer Artificial Intelligence (AI) Stock That Could Make a Monster Comeback This Year
Key Points
Microsoft's latest quarterly results were solid.
The stock is priced at historically low levels.
- 10 stocks we like better than Microsoft ›
Microsoft (NASDAQ: MSFT) has been a disappointment to its shareholders this year, to say the least. While many other artificial intelligence (AI) stocks are at or near all-time highs, Microsoft is down around 15% so far in 2026. But that doesn't necessarily mean that it's going to stay there.
When you look at how the company is actually doing and examine its valuation from a historical standpoint, it becomes clear that Microsoft doesn't belong in a slump; it belongs at fresh all-time highs like its peers. I think it can make a monster comeback this year and notch a new all-time high by the end of 2026, so investors should take advantage of the low price that it's presenting now.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
Image source: Getty Images.
Microsoft is delivering solid results
Microsoft recently announced its fiscal 2026 Q3 results, and they were outstanding. Revenue was up 18% year over year, and operating income was up 20%. There's not a whole lot to be disappointed with there, as it conveys a strong company getting stronger.
Azure, Microsoft's cloud computing business, is one of the biggest ways AI spending shows up. Clients rent computing power on Azure to train and run AI models, making it a massive revenue driver for Microsoft. Azure's revenue grew 40% in the quarter.
Microsoft's AI business outside of cloud computing is also booming. It sits at a $37 billion annual run rate, and grew at a jaw-dropping 123% year-over-year pace.
From that standpoint, it seems pretty clear that Microsoft is doing well as a business, yet it isn't translating into stock performance.
However, a company can only have incredible business results and poor share price performance for so long before the stock gets too cheap and the broader market takes notice. I think we're nearing that point.
My preferred valuation metric for Microsoft's stock is the operating price-to-earnings ratio. Instead of using net income as the denominator, it uses operating income. Operating income isn't affected by one-time expenses such as tax events or gains on investments. Trading at about 21 times operating income, Microsoft is around the cheapest it has been in the past decade.
MSFT Operating PE Ratio data by YCharts.
Microsoft is operating at a high level and trading at a low valuation. It's hard to ask for much more, which is why I think Microsoft is a top AI investment now. It may take a bit of time for it to come back into favor with the market, but when it does, it will deliver impressive upside.
Should you buy stock in Microsoft right now?
Before you buy stock in Microsoft, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Microsoft wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $490,864!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,216,789!*
Now, it’s worth noting Stock Advisor’s total average return is 963% — a market-crushing outperformance compared to 201% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of May 6, 2026.
Keithen Drury has positions in Microsoft. The Motley Fool has positions in and recommends Microsoft. The Motley Fool has a disclosure policy.
Recommended Articles
