Is Microsoft a Screaming Buy Under $500 Per Share?

Microsoft (NASDAQ: MSFT) has had an interesting 2026. It started off the year on a poor note, dropping after it reported results for its fiscal 2026 second quarter (which ended Dec. 31). After further ups and downs through the year, it took the delivery of strong fiscal Q4 results on July 29 to get the stock to rally convincingly, but it's now basically back to flat for the year. With the S&P 500 (SNPINDEX: ^GSPC) up by more than 12% so far, Microsoft has been a poor investment in 2026.

However, is now the perfect time to load up on shares before an even bigger rally can occur? Let's take a look and see if Microsoft is worth buying below the $500 per share threshold.

Image source: Getty Images.

Microsoft is trading at a lower-than-usual forward P/E

Microsoft is one of the major players in the AI realm, and it's profiting from the trend in several ways. The first way is through its Copilot tool, which incorporates AI features into all of its software products. Copilot now has 30 million paid seats -- a figure that will likely continue rising as the tool becomes more popular.

Another way Microsoft is thriving from the AI build-out is via its cloud computing division, Azure. Azure is one of the largest cloud computing providers in the world, and makes money by building out computing capacity, then renting it out to various clients. Azure's revenue grew at a 43% pace last quarter, making it Microsoft's fastest-growing division.

But does all of this add up to a stock that's worth buying now?

If you look at how Microsoft has been valued on a forward price-to-earnings (P/E) ratio basis, it's not as cheap today as it was prior to the fiscal Q4 report. However, it's still cheaper than it has been over most of the past two years.

MSFT PE Ratio (Forward) data by YCharts

This makes the stock look like a somewhat good deal, but is it better than its peers? I'd argue that it's not.

Microsoft is trading at a more expensive premium than Nvidia (NASDAQ: NVDA), Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), or Amazon (NASDAQ: AMZN), yet it's growing at a slower pace than any of them.

MSFT PE Ratio (Forward) data by YCharts

From a growth standpoint, everyone is chasing Nvidia, but Microsoft still lags behind Amazon and Alphabet.

MSFT Revenue (Quarterly YoY Growth) data by YCharts.

So, is Microsoft a bad investment? I don't think so. I think it's reasonably valued right now. However, there are better deals available in the market, and I think investors would be better advised to move their money into those other three tech stocks, as they all have far more upside potential than Microsoft.

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