I Just Bought the Dip on Microsoft Stock. Here Are 4 Reasons Why You Should Follow

One investing mistake I made about five years ago was selling Microsoft (NASDAQ: MSFT) stock. I made a solid profit on the initial investment, then sold the shares when they were trading at about $150. With the stock at over $400 now, that was clearly a huge error. While Microsoft stock may not be that cheap anymore, it is cheaper than it has been in recent months. Thanks to a huge sell-off following its fiscal year 2026 Q2 earnings announcement (Q2 ended Dec. 31), Microsoft stock is now down more than 20% from its all-time highs.

I took this as my opportunity to buy back shares of a company that I regretted selling, as I think this is just a short-term reaction for a very healthy company positioned to thrive in the artificial intelligence (AI) era. I've got four reasons why I purchased Microsoft's stock, although there could be countless other reasons to buy it now.

Image source: Getty Images.

1. Azure is the star of the show

My n1umber one reason to buy Microsoft stock is Azure, its cloud computing business. Cloud computing providers are thriving in the AI era, as their computing resources are being rented out nonstop. This is also why Microsoft is spending big on data centers, as they are looking to capture a huge market.

Azure's revenue grew 39% year over year, showcasing strong demand for its resources. Azure will continue to be a strong reason to own Microsoft stock, and if something happens to it that slows growth, I may rethink my Microsoft position. However, I don't see that happening anytime soon.

2. Microsoft is the only way to gain exposure to OpenAI

Investing in private companies isn't impossible, but it isn't easy. Most investors can't have access to OpenAI, the makers of ChatGPT. However, Microsoft has a 27% ownership stake in the business, so by investing in Microsoft, you gain large exposure to OpenAI.

Now, OpenAI isn't a huge part of Microsoft's overall business, so the exposure is still relatively limited. This is still a great way to potentially profit from the rise of generative AI valuations, and adds another reason why Microsoft stock is a solid investment pick.

3. Microsoft's business was strong companywide

Although I'm most focused on Azure, the reality is that Microsoft's business is doing well overall. Its Productivity and Business Processes division, which encompasses most of the software utilized for businesses, experienced 16% growth, with multiple business units within that division reporting excellent results. Consumer cloud revenue rose 29%, and Dynamics 365 increased by 19%. These are all clues as to how well Microsoft is doing with its customer base, and it's clear that the recent integration of AI features is helping drive growth.

Overall, Microsoft's revenue increased by 17% year over year to $81.3 billion. That's an impressive figure and showcases just how strong Microsoft is.

4. Microsoft's stock trades at a great price tag

Part of the reason why I failed to repurchase Microsoft shares was that it always traded for a premium valuation. While that turned out to be a mistake on my part, Microsoft now trades at some of its lowest valuation levels in recent history.

If you value the stock on its operating price-to-earnings (P/E) ratio, it's near the lowest valuation levels since 2020 and the deep market sell-offs in 2023 and April 2025.

MSFT Operating PE Ratio data by YCharts

I think this is the best valuation measure for Microsoft, as it excludes net income gains caused by its OpenAI investment rising. This was enough of a sign to tell me to buy Microsoft stock, which is why I scooped up shares following its earnings decline.

I think investors should do the same, as there is still plenty of upside for Microsoft stock over the next few years.

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