Down 22% in 6 Months, Is Microsoft Stock a Buy?
Key Points
The tech behemoth's financial results have been good, just not quite as good as the market wanted.
But after dropping meaningfully in the past six months, its shares look attractive at current levels.
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After performing well for the first six months or so of 2025, shares of Microsoft (NASDAQ: MSFT) started moving in the wrong direction in the second half of the year. And the company has shown no signs of a rebound so far in 2026. Microsoft's shares are down by 22% over the past six months.
Should investors consider purchasing the stock now, or will the company remain southbound for the foreseeable future? Let's find out.
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Image source: Getty Images.
Why is Microsoft dipping?
The company's financial results haven't been bad. In the second quarter of its fiscal 2026, ended on Dec. 31, revenue increased by 17% year over year to $81.3 billion. Microsoft's cloud business remains the star of the show. Azure revenue climbed 39%, well ahead of the overall business. Adjusted earnings per share were up 24% to $4.14. So far, so good.
However, management is spending a lot to fuel its cloud and artificial intelligence ambitions. The company's capital expenditures (capex) for the period were $37.5 billion, up almost 66% year over year. But Azure growth seems to be stabilizing, and the company's 2026 third-quarter guidance provides further evidence of that, with a projected increase of 37% to 38% (in constant currency).
The problem isn't that Microsoft isn't performing well. It's that the high growth driven by Azure (given its capex spending) was already baked into the stock price, so anything that looks "average" by the company's lofty standards simply isn't good enough. The market wanted to see accelerating growth. That's one of the biggest reasons the stock has been moving in the wrong direction.
Why now may be a good time to buy
The poor performance over the past six months has made the stock much more reasonably valued. The company is currently trading at 24.7 times forward earnings, which is very reasonable compared to its peers in the "Magnificent Seven" -- and for that matter, versus the industry average of 24.5.
MSFT PE Ratio (Forward) data by YCharts; PE = price to earnings.
Even with slowing growth, Microsoft remains one of the leaders in cloud computing and AI, thanks to its deep enterprise relationships and its partnership with OpenAI, a market leader. The company also benefits from a strong competitive advantage from switching costs.
And even if the stock is due for a sell-off, given stabilizing growth in its Azure division, Microsoft looks very attractive to long-term investors at current levels.
Can capex cause a problem down the line? Potentially, but the company has shown that it can pivot quickly and cut costs if its ambitions fail to materialize, as it did a few years ago, notably by cutting jobs, among other things. So, Microsoft is a buy at current levels, at least for investors wanting to hold the stock for the next five years and beyond.
Should you buy stock in Microsoft right now?
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Prosper Junior Bakiny has positions in Alphabet, Amazon, Meta Platforms, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has a disclosure policy.
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