Is Microsoft the Next Alphabet?

It may seem like an odd question, asking if Microsoft (NASDAQ: MSFT) is the next Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), especially since they are both multitrillion-dollar companies. But I'm not talking about one company copying the other in terms of product or strategy. Instead, I'm talking about how the stock behaves.

Alphabet's stock went through a fairly long stretch of undervaluation before rocketing higher throughout most of 2025. Now, Microsoft is entering a stretch where I think it could be undervalued.

So, if Microsoft stock follows in the footsteps of Alphabet, now could be a genius time to buy the stock.

Image source: Getty Images.

Alphabet has some internal issues to work through

For those who have invested in the stock market for a handful of years, you may remember how negative the markets were at the start of 2023. Everyone was convinced the economy was headed into an economic recession, and stocks were valued at recent lows. Alphabet and Microsoft were no exception, and their stocks were valued at lows not seen for many years.

GOOGL PE Ratio data by YCharts

Eventually, the stocks recovered throughout the year, but Alphabet's stock began to falter again in early 2025. The company was facing several challenges: court cases threatening to break it up due to a monopoly accusation, Google Search potentially being replaced by generative artificial intelligence (AI), and it falling behind to start-ups in the AI space. However, by the end of 2025, it was clear that none of those three worries were legitimate, so the stock market responded by buying up Alphabet stock, which increased its valuation.

At a price-to-earnings ratio of nearly 29, Alphabet is now valued at some of the highest levels it has seen in several years, a price tag I feel it deserves due to its excellent execution.

But what about Microsoft?

Microsoft's stock is faltering

The reality is, Microsoft doesn't face any of the challenges that Alphabet did. Instead of competing in the AI arena, Microsoft is choosing to facilitate various models. However, it does have a vested interest in OpenAI (it owns more than a quarter of the company). It also doesn't have to worry about its core product being disrupted at this time, and there are no legitimate legal threats. So, the road back to a premium valuation isn't a difficult one.

With Microsoft stock being valued at its lowest point since the 2023 sell-off, now appears to be an excellent time to buy.

There aren't any signs of weakness in Microsoft's business. Companywide, its revenue rose 17% year over year during the second quarter of fiscal year 2026 (ended Dec. 31). Its most exposed segment to AI, Azure, saw tremendous growth of 39% year over year. Wall Street analysts are bullish on the stock for the remainder of fiscal year 2026 and into fiscal year 2027, with revenue growth expected to come in at 16% and 15%, respectively.

There's really not a lot to nitpick with Microsoft's results, which is why the 24 times trailing earnings price tag is so tantalizing. Deals like this don't come around often, and every investor should be taking this opportunity to load up on the stock.

Microsoft has proven it deserves to trade at a premium valuation level, and returning to the high-20s to low-30s range is likely inevitable. Should Microsoft trade at 30 times earnings, that would indicate the stock has 25% upside based on valuation alone. That doesn't include any of the earnings growth that it's expected to generate over the next few years, either.

I think Microsoft can easily make a comeback and become the next Alphabet by the end of 2026. Its return will yield impressive investment gains, and I think now is the perfect time to load up on the stock.

Keithen Drury has positions in Alphabet and Microsoft. The Motley Fool has positions in and recommends Alphabet and Microsoft. The Motley Fool has a disclosure policy.