Microsoft Stock Is Down 27% From Its All-Time High. 2 Reasons It Could Double by 2030.

Microsoft (NASDAQ: MSFT) stock has fallen 27% from its all-time high, as Wall Street focuses on heavy capital spending to support artificial intelligence (AI) infrastructure. Yet Microsoft's deep enterprise relationships continue to drive solid demand across its productivity software, cloud, and Copilot platforms.

Microsoft's earnings per share nearly doubled over the last five years, and analysts currently project earnings growth of 16% annually in the next few years. That growth trajectory is enough for the stock to double by 2030. The stock is also trading at a discounted price-to-earnings (P/E) multiple to other hyperscalers, which could boost returns if it rerates at a higher multiple.

Here are two reasons investors can expect Microsoft to meet those earnings growth estimates and deliver market-beating returns.

Image source: The Motley Fool.

1. Microsoft is leveraging a large installed customer base

CEO Satya Nadella stated the opportunity on the last earnings call, saying, "We are at the beginning of one of the most consequential platform shifts that will change the entire tech stack as agents proliferate and become the dominant workload."

The advantage for Microsoft is that it already has a large installed base of enterprises that have been customers for years. Its productivity and business process revenue grew 17% year over year to $35 billion. Paid 365 Copilot seats (or licensed users) exceeded 20 million, with management reporting accelerating net additions and higher average revenue per user.

Microsoft's WorkIQ system provides Copilot with data intelligence and now has more than 17 exabytes of data. That's a powerful advantage. This data makes Copilot smarter and better able to leverage all of Microsoft's services to complete tasks.

Enterprises can use agents with the apps they already use. For example, agent mode in Microsoft 365 Copilot can automatically route tasks across Word, Excel, Outlook, Teams, and other apps. That might explain why nearly 90% of Fortune 500 companies are using active agents built with Copilot Studio.

2. Microsoft is unlocking a massive cloud backlog

Wall Street doesn't like Microsoft's guidance, which calls for up to $190 billion in capital expenditures in calendar 2026. This is more than Microsoft's trailing cash from operations of $170 billion, so investors are discounting the stock to account for lower margins and free cash flow.

Still, Microsoft is one of the leading cloud computing providers, with a growing backlog of $627 billion in remaining performance obligations. As it unlocks more compute capacity, management expects its enterprise cloud revenue on the Azure platform to accelerate in the second half of 2026.

In the long term, Microsoft's investments in developing its custom Maia AI chips and adding more compute capacity should lead to lower compute costs and greater AI efficiency. This can increase its margins and strengthen Microsoft's competitive position.

Overall, this appears to be a classic case of Wall Street punishing a stock for lack of near-term earnings visibility while underestimating Microsoft's opportunity to capitalize on growing demand for agentic AI. As Microsoft reports strong revenue growth in the coming quarters, the stock could recover and eventually double by 2030.

John Ballard 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.