Is Now a Good Time to Buy Microsoft Stock?
The Motley Fool • • business
Key Points:
- Microsoft shares have dropped over 26% year-to-date, despite the company reporting strong fiscal Q2 results with 17% revenue growth and a 24% increase in adjusted earnings per share, driven mainly by its cloud operations.
- The company's cloud revenue grew 26% year over year, with Azure and other cloud services up 39%, but competition is intensifying as Alphabet's Google Cloud revenue surged 48%, outpacing Microsoft's cloud growth rate.
- Microsoft is heavily investing in AI infrastructure, with capital expenditures up 66% year over year, but AI also poses long-term risks to its software subscription model by potentially reducing the need for human workers and lowering demand for Microsoft 365 seats.
- Despite a current price-to-earnings ratio around 22 suggesting a reasonable valuation, risks from rising expenses, fierce cloud competition, and AI-related uncertainties may justify a lower stock price, leading some analysts to recommend waiting for a deeper discount before buying.
