Prediction: This "Magnificent Seven" Growth Stock Will Hit an All-Time in June. Here's Why It's Worth Buying Now.

Microsoft (NASDAQ: MSFT) stock has been on a tear ever since the tech giant reported its fiscal 2025 third-quarter earnings on April 30. The stock soared by 16.5% in May and is now just a few percentage points below its all-time high.

Despite that run-up, there are plenty of reasons to believe that this growth stock is still a good value for long-term investors.

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Growing on multiple fronts

Microsoft has made a monster comeback in 2025, even relative to other "Magnificent Seven" stocks. That group of megacap tech-focused companies has led the major stock market indexes -- including the S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite (NASDAQINDEX: ^IXIC) -- to new heights in recent years.

META data by YCharts.

What separates Microsoft from other growth stocks is its business model.

Microsoft has three segments. The smallest -- which it calls "more personal computing" -- is also its slowest growing and has the lowest margins. But it is still a highly profitable segment -- consisting of Windows, devices, gaming through Xbox, and more.

The other two segments are fast growing and produce ultra-high margins. "Productivity and business processes" consists of the Microsoft 365 suite of products and cloud services, which include the artificial intelligence (AI) assistant Microsoft 365 Copilot. Microsoft has done an excellent job growing this segment with newer software through Microsoft Teams, the expansion of SharePoint, and the improvement of existing software using AI tools.

Its "intelligent cloud" segment includes server products and cloud services -- led by Azure, as well as GitHub cloud services and enterprise solutions. Microsoft is the undisputed No. 2 player in cloud computing behind Amazon Web Services (AWS), but Azure has been gaining market share.

The days of Microsoft being a slow and stodgy legacy hardware and software business are long gone. The Microsoft of today is a coiled spring for capitalizing on massive investments in productivity growth, whether that's through AI-powered solutions, cloud, or enterprise solutions.

It also benefits from incredibly high pricing power because it has established solutions that are popular among individual users, students, and businesses -- giving it a captive audience to which it can upsell new AI tools. The adoption of Microsoft 365 Copilots, GitHub Copilot, and Azure AI solutions continues to grow.

In a league of its own

Microsoft has arguably the most stable business model of the Magnificent Seven without compromising on upside potential in key trends like cloud computing and AI. Consider its six megacap peers:

Amazon is heavily dependent on AWS for its long-term growth.

Apple still makes most of its money on products, led by the iPhone. Though it does have a high-margin service segment, its overall growth has been slowing.

Nvidia's growth has mainly come from sales of graphics processing units for AI and high-performance computing. Its concentration in this high-margin industry has taken Nvidia to new heights, but has also made it more of a pure-play AI company than it was in the past.

Alphabet still makes the bulk of its revenue from Google Search.

Instagram is a high-powered growth engine for Meta Platforms, but its success has made Meta less diversified than it used to be.

Tesla has potential to grow through autonomous vehicles, a robotaxi service, robotics, and renewable energy. But for now, it remains primarily a car company.

This isn't to say that the other Magnificent Seven stocks aren't compelling buys now (in fact, I think Apple, Nvidia, Alphabet, and Meta Platforms all stand out as good buys). Rather, the takeaway is that Microsoft has arguably the best business model in terms of diversification. It's capitalizing on multiple growth trends, and isn't overly reliant on one product or service.

Financial strength powers capital returns to shareholders

Having a great business model means little if it is built on top of a shaky financial foundation. But Microsoft happens to have an ultra-elite balance sheet.

It sports perfect corporate credit ratings from top agencies S&P Global (AAA) and Moody's (Aaa). Those high ratings are based on the strength of Microsoft's business and the fact that its capital structure doesn't depend on debt. Indeed, Microsoft exited the most recent quarter with roughly twice as much in cash, cash equivalents, and short-term investments on its books as long-term debt.

Its excellent business model and strong balance sheet mean the company doesn't have big interest expenses, which can eat away at profits and leave less cash flow to return to shareholders. Because it can fund its operations and long-term growth plans with cash from the business, it can pass along a considerable amount of capital to shareholders through stock buybacks and dividends. Microsoft not only distributes more total dividends than any other U.S. company, but it also has the highest dividend yield of the Magnificent Seven. Granted, that's just 0.7% at the current share price. However, its total capital return program is much more appealing when one considers its 15 consecutive years of dividend raises and its share buybacks.

A high-conviction buy for June

Microsoft is a buy because it is an ultra-high-quality company that investors can count on even during times of uncertainty. It can continue investing in long-term growth because of its diversified, high-margin business segments and rock-solid balance sheet. Investors can also count on the company to consistently repurchase stock and grow the dividend.

The only drawback is its valuation. Microsoft sports a 35.6 price-to-earnings (P/E) ratio -- which is a good bit higher than the S&P 500's average P/E ratio of 28.2 but not too far above Microsoft's 10-year median ratio of 32.7.

The good news is that Microsoft has steadily been growing earnings at around 10% per year -- and there's no reason to believe that growth rate will change anytime soon. So it should be able to grow into its current valuation over time.

Add it all up, and Microsoft stands out as a well-rounded buy in June for investors willing to pay a premium price for a quality company.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Daniel Foelber has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Moody's, Nvidia, S&P Global, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.