Down 25% From Its High, Is Now the Time to Buy Microsoft Stock?
Key Points
Microsoft's stock hasn't been this cheap in months.
The company's Azure business grew at a slighter slower rate than expected in Q2.
However, Microsoft still expects plenty of growth ahead, especially in artificial intelligence.
- 10 stocks we like better than Microsoft ›
It's been a tough start to 2026 for Microsoft (NASDAQ: MSFT), which is down more than 10% thus far and in danger of falling below $3 trillion in market cap. It would be a symbolic exclamation mark of the decline this normally stable stock has been on of late. It's currently down around 25% from its 52-week high of $555.45.
What's gotten investors so down on the stock of late? And is this a great opportunity to invest in one of the largest tech companies in the world, or could Microsoft's stock be heading for more of a decline in the weeks and months ahead?
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Microsoft's latest earnings numbers didn't impress investors
Last month, Microsoft released its second-quarter earnings, which covered the last three months of 2025. It was a solid quarter for the business as revenue of $81.3 billion was up 17% year over year. But what seemed to alarm investors was a worse-than-expected growth rate in its cloud business, Azure. At 39%, it was slightly below what analysts expected and down from 40% growth in the previous period.
Azure is a key growth catalyst for Microsoft, and any hint of a slowdown there can often raise concerns for growth investors, which appears to be what has happened here. This is even as CEO Satya Nadella speaks fondly of the company's growing artificial intelligence (AI) business, saying that the company is "only at the beginning phases of AI diffusion and already Microsoft has built an AI business that is larger than some of our biggest franchises."
Why now might be a great time to buy Microsoft's stock
Amid the post-earnings sell-off, Microsoft's stock fell to levels it hadn't been at since April of last year, when concerns around reciprocal tariffs weighed down the markets. While it has been trading higher in recent days, it's still down around 20% over the past six months. For long-term investors, this can be an opportune time to invest in one of the safest tech stocks in the world.
Currently, Microsoft trades at around 26 times its trailing earnings, which is an attractive valuation when you consider that the average S&P 500 stock trades at 25 times its earnings. Microsoft isn't an expensive stock to own by comparison, as it arguably deserves a bit of a premium. And with plenty of growth opportunities related to AI still out there for the business to tap into, it can make for a no-brainer investment to hold on to for the long term.
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft. The Motley Fool has a disclosure policy.
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