Microsoft (NASDAQ: MSFT) has not been a highly valued stock by the market lately. While the majority of the market has notched new all-time highs within the past year, Microsoft has floundered. It’s now 35% down from its all-time high, making it look like a potentially great stock to buy on the dip.

However, just because a stock is on sale doesn’t mean that it’s cheap. Let’s take a look at Microsoft’s stock price and see if you should consider buying its shares now.

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Microsoft Rarely Gets This Cheap

Microsoft is a massive tech conglomerate best known for its business productivity software. However, its business is much broader than that, as it owns LinkedIn, runs a thriving cloud computing service, and owns a video game company. But as with every company in today’s market, everyone wants to know what Microsoft is doing with artificial intelligence (AI).

Fortunately, Microsoft has an AI strategy that appears to be working out.

It has incorporated AI productivity tools into its various applications through Copilot, which has reached a $37 billion annual run rate and is growing at a 123% pace. Microsoft Azure has also become a popular platform for building AI applications. In fact, many of OpenAI’s (the makers of ChatGPT) models are trained and run on Azure. During the third quarter of fiscal year (FY) 2026 (ending March 31), Azure’s growth rate was 40%. Despite these strong business units, the market isn’t in love with Microsoft’s stock, which has deeply sold off. But I think that’s a mistake.

Microsoft’s stock is unbelievably cheap from many viewpoints, and now is the perfect time to pounce. From an earnings standpoint, this is the cheapest Microsoft has been over the past decade.

A Healthy Earnings Growth Rate

MSFT PE Ratio data by YCharts

Microsoft has a healthy earnings growth rate (its diluted earnings per share (EPS) rose 23% in its most recent quarter), so if Microsoft’s stock price stays flat, the stock will continue to get cheaper.

Sometimes earnings can be skewed due to one-time events, but cash flow metrics are normally a bit more stable. From an operating cash flow perspective, Microsoft isn’t quite at decade lows, but it’s very close.

MSFT Price to CFO Per Share (TTM) data by YCharts

Microsoft clearly doesn’t get this cheap all that often, and with the strong success its business is seeing, I think it’s a no-brainer buy today. Smart investors like billionaire Bill Ackman took a $2 billion position during the first quarter of the calendar year, and the stock is now cheaper than at any point in that quarter. I think this clearly marks Microsoft as a smart buy, and long-term investors will be happy they bought shares today.

A Strategic Move in AI

Microsoft’s investment in artificial intelligence (AI) has been one of its most significant strategic moves in recent years. The company has positioned itself as a leader in the AI space by integrating advanced tools into its existing products and services. Copilot, for instance, is not just an AI assistant but a comprehensive platform that enhances productivity across various applications.

The success of Copilot is evident in its rapid growth, with a $37 billion annual run rate and a 123% year-over-year increase. This indicates strong adoption and user engagement, which are crucial indicators of the product’s value and market acceptance. Additionally, Microsoft Azure has become a key player in the AI infrastructure space, offering scalable cloud solutions that support the development and deployment of AI applications.

The fact that many of OpenAI’s models are trained and run on Azure highlights Microsoft’s role as a critical enabler in the AI ecosystem. This partnership not only strengthens Microsoft’s position in the market but also underscores its commitment to innovation and technological advancement.

Why This Matters

The current decline in Microsoft’s stock price presents an opportunity for investors who recognize the underlying strength of the company’s business model and strategic initiatives. The market’s reaction to AI-related news has led to a significant drop in Microsoft’s valuation, creating a buying opportunity for those with a long-term perspective.

Investors should consider the broader implications of this decline. While the stock price may have dropped, the fundamentals of the company remain strong. Microsoft’s diverse portfolio, including its cloud computing services and AI tools, positions it well for future growth. The integration of AI into its products not only enhances user experience but also drives innovation across various sectors.

Moreover, the recent investments in AI by major players like OpenAI highlight the importance of a robust infrastructure for developing and deploying AI applications. Microsoft’s role as a provider of such infrastructure is crucial, and this position is likely to strengthen as demand for AI solutions continues to grow.

Potential Impact

The potential impact of investing in Microsoft at its current valuation could be significant. For long-term investors, the opportunity to purchase shares at a discount while benefiting from the company’s strong growth trajectory is attractive. The recent performance of Copilot and Azure indicates that the company is well-positioned to capitalize on the growing demand for AI solutions.

Additionally, the strategic partnerships and collaborations Microsoft has formed in the AI space further enhance its competitive advantage. These relationships not only provide access to cutting-edge technology but also open up new markets and revenue streams. As more companies adopt AI technologies, the demand for reliable cloud infrastructure will continue to rise, benefiting Microsoft’s Azure platform.

Investors should also consider the broader market trends that are influencing stock valuations. The current environment is characterized by rapid technological advancements and shifting consumer preferences. Companies that can adapt quickly and innovate effectively are likely to outperform their competitors. Microsoft’s ability to integrate AI into its products and services demonstrates its agility and commitment to staying at the forefront of technological innovation.

Conclusion

In conclusion, the decline in Microsoft’s stock price presents a compelling opportunity for investors who recognize the company’s strong fundamentals and strategic initiatives. The integration of AI into its products and services has positioned Microsoft as a leader in the evolving technology landscape. While the market may be reacting to AI-related news with panic, the underlying strength of Microsoft’s business model remains intact.

For long-term investors, the current valuation offers an attractive entry point to capitalize on the company’s growth potential. The recent performance of Copilot and Azure highlights the effectiveness of Microsoft’s AI strategy and its ability to meet market demands. As more companies adopt AI technologies, the demand for reliable cloud infrastructure will continue to rise, further solidifying Microsoft’s position in the market.

Investors should also consider the broader implications of this decline, including the potential impact on the stock price and the company’s future growth trajectory. The current environment is characterized by rapid technological advancements and shifting consumer preferences, which favor companies that can adapt quickly and innovate effectively. Microsoft’s ability to integrate AI into its products and services demonstrates its agility and commitment to staying at the forefront of technological innovation.

As the market continues to evolve, investors should remain vigilant and consider the long-term implications of their investment decisions. The opportunity to purchase shares in Microsoft at a discount while benefiting from the company’s strong growth trajectory is an attractive proposition for those with a strategic approach to investing. By focusing on the fundamentals and recognizing the potential impact of AI on the market, investors can position themselves to benefit from the ongoing technological advancements shaping the future of business and technology.

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