This Tech Stock Is Trading Below Where It Was a Year Ago — but Its Business Has Never Been Stronger

Overall, Microsoft’s revenue for the most recently reported quarter was $82.9 billion, up 18% year over year. Operating income was $38.4 billion, up 20%, and earnings per share rose 23% to $4.27.

While all that is great, though, what I’m most interested in when it comes to Microsoft is the performance of its cloud computing segment.

The cloud is Microsoft’s biggest opportunity — and a temporary pain point

Undoubtedly, Microsoft 365 comprises an impressive suite of tools. But its growth pales in comparison to the growth of its intelligent cloud unit.

Source: Microsoft. YOY = year over year.

The first unit, productivity and business services, includes Microsoft 365 and LinkedIn, while the more personal computing unit includes the Windows operating system, its Bing search engine, Surface devices, and Xbox gaming consoles.

But the fastest-growing segment is intelligent cloud, which includes Microsoft Azure and cloud services. That division grew by 30% over the last year, and its revenue now almost equals that of the business segment that includes Microsoft 365. Azure is the No. 2 cloud infrastructure provider in the world by market share, with 21%, behind only Amazon Web Services (28%). Grand View Research projects that the cloud computing market will grow from $943.7 billion in 2025 to nearly $3.4 trillion by 2033, for a compound annual growth rate of 16%.

While that offers Microsoft a massive opportunity, taking advantage of it will require tremendous investment. Microsoft plans to spend $190 billion this year alone on AI infrastructure, with much of that going toward the purchase of graphics processing units (GPUs) and central processing units (CPUs) to run AI workloads. And Microsoft was forced to increase its capital expenditure budget by $25 billion for the year due to rising component costs, further cutting into the company’s profitability.

Microsoft spent $31.9 billion in the most recent quarter on capex, and expects that to increase to $40 billion in this quarter.

Why Microsoft is a buy

Wall Street remains exceptionally bullish on Microsoft: According to Yahoo! Finance, 55 of 58 of the analysts following the company have buy ratings on the stock. Their consensus price target of $560 suggests a potential upside of 33%.

But while investors seem hesitant to buy Microsoft stock, I think it continues to have a strong growth story — and that its investments in AI will be critical to supporting the growing demand for cloud computing capacity.

That’s why if you’re looking for a bargain-priced tech stock right now, Microsoft is a great one to consider.

Should you buy stock in Microsoft right now?

Before you buy stock in Microsoft, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Microsoft wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $477,813!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,320,088!*

Now, it’s worth noting Stock Advisor’s total average return is 986% — a market-crushing outperformance compared to 208% for the S&P 500. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.

See the 10 stocks »

*Stock Advisor returns as of May 25, 2026.

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

This Tech Stock Is Trading Below Where It Was a Year Ago — but Its Business Has Never Been Stronger was originally published by The Motley Fool