I've Been Wrong About Microsoft Stock for Years. Here's Why I'm Finally Changing My Mind.

For the last five years, I've been the person rolling my eyes at Microsoft's (NASDAQ: MSFT) valuation and calling it priced for perfection. Today, after its latest set of numbers and the way the company has embedded itself into AI, cloud, and everyday work, I'm finally willing to say it: At these levels, Microsoft is an easy buy for a long‑term investor.

Back in the 2021 to 2022 time frame, my skepticism sounded reasonable. Microsoft was trading at a rich multiple compared with its own history, and it felt like everyone already knew the bull case: dominant Windows, sticky Office, and fast‑growing Azure. I kept waiting for growth to slow or margins to crack.

Instead, 2026 gave a very different picture. In the fiscal year that ended June 30, Microsoft's revenue climbed 18% to more than $331 billion, while operating income rose 21% to more than $155 billion. Net income hit $133.7 billion, with full‑year EPS growth comfortably above 20% even after stripping out gains from OpenAI and Anthropic investments. Those are not the numbers of a mature company just coasting on its legacy.

Image source: Getty Images.

Microsoft is turning into an AI tycoon

The AI story is where I was most wrong. I assumed the AI halo would be mostly narrative. Instead, it has become a concrete, growing business.

In the latest quarter, revenue reached $90 billion, up 18% year over year, driven by 32% growth in the Intelligent Cloud segment and Azure revenue now surpassing $100 billion annually. Microsoft says its AI business has crossed a $37 billion annual run rate, growing 123% year over year. This is not really a side hustle. It's a growth engine.

On top of this, Azure grew 43% year over year in fiscal Q4 2026, and CEO Satya Nadella said Microsoft's custom AI chips can deliver up to 40% better performance per watt, potentially improving cloud margins and earnings.

Copilot is the clearest proof that this is real monetization, not just GPU reselling. Microsoft 365 Copilot has already passed 30 million paid seats, with net seat adds more than doubling quarter over quarter as enterprises move from pilots to production.

Microsoft is rolling Copilot out across knowledge work, coding, security, and even as a super app that ties consumer and commercial experiences together. That means AI is getting woven into the subscription backbone of the company's productivity and business software.

The part that finally changed my mind, though, is the valuation-versus-execution debate. As of early August 2026, Microsoft trades at a trailing P/E of 28 to 28.5, which is slightly below its 10‑year average of 30. Forward P/E estimates sit around 25 based on current consensus, even as the company continues to grow revenue in the high teens and EPS in the low-to-mid‑20s.

That is not cheap in an absolute sense, but for a business with Microsoft's moat and growth profile, it looks more like fair for a wonderful company than irrational exuberance.

I think it's time to buy

Could I wait for a better entry point? Sure. There will always be a pullback. But the last five years have taught me that trying to shave a few multiple points off the price has been far more costly than simply owning a compounding machine that keeps finding new profit pools -- first cloud, now AI, and next whatever sits on top of that stack.

Microsoft today is not just a safe blue chip; it is one of the few companies genuinely defining the next era of enterprise computing. I spent half a decade treating it as too expensive. Now I'm much more worried about the opportunity cost of staying on the sidelines.

Micah Zimmerman 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.