Up 26% Since July 29, Is It Too Late to Buy Microsoft Stock?

Microsoft (NASDAQ: MSFT) stock has been on quite a run since the company reported its results for the fourth quarter of its fiscal 2026 (which ended June 30). Microsoft delivered those results after the close of trading on July 29, and investors sent the stock skyrocketing the following day. They have continued bidding the stock higher, and it's now up by an impressive 26% since the report came out.

That's a huge run in a short time frame, and for a company as large as Microsoft, it may make investors feel like they've missed the boat. So, is it too late to buy shares for now? Or is this rally an indication of something new?

Image source: Getty Images.

Microsoft's rally takes it back to the top of big tech

Microsoft is a major software company that is also diving deep into AI. It is exposed to AI in two ways: its internal products and its cloud computing business. Microsoft Copilot is its in-house AI tool meant to provide general AI use and also interface with the Office suite of productivity titles. This product reached over 30 million paid seats in the quarter, showcasing strong growth.

However, cloud computing is more of a focus area for investors. Microsoft Azure continued to grow rapidly, with revenue rising 43% year over year. To make money, though, it must build cloud computing capacity and infrastructure, which is why Microsoft is spending hundreds of billions of dollars on data centers. While some of Microsoft's hyperscaler competitors, like Amazon (NASDAQ: AMZN) and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), recently increased their already lofty spending capex expectations for 2026, Microsoft left its capex guidance unchanged. The market is worried that the AI hyperscalers may be overspending on their data center build-outs, so the news that Microsoft was not planning to further accelerate its outlays this year likely helped bolster its share price.

Still, the biggest reason why Microsoft had such a rapid rise following its earnings report was how cheap the stock was ahead of it. At the start of July and leading up to the release date, Microsoft stock traded for less than 20 times forward earnings -- its cheapest valuation in a long time. Considering how strong a business Microsoft is, this valuation level made no sense.

MSFT PE Ratio (Forward) data by YCharts.

Microsoft now trades at a far more reasonable level. It's still on the low end of its recent levels, but it is also at the higher end of the valuation spectrum compared to some of its big tech peers.

MSFT PE Ratio (Forward) data by YCharts.

In short, many investors have missed their opportunity to buy Microsoft at the dirt cheap levels it traded at earlier this summer. While I still think Microsoft can be a successful and market-beating investment over the next few years, a lot of the growth the stock had coming was delivered in just a few days.

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