Microsoft heads into its fiscal 2026 fourth-quarter report on July 29 trading 29% below its record high. A Motley Fool analyst argues the stock looks attractively priced, pointing to accelerating Azure growth, rapid Copilot uptake, and a P/E well below its big-tech peers.
Microsoft trades 29% below its record high as it approaches its fiscal 2026 fourth-quarter report, due July 29 for the period ended June 30. Motley Fool analyst Anthony Di Pizio argues that the release could spark a recovery in the stock, which he says has been dragged down alongside a broader sell-off in the software sector.
That sell-off reflects investor fear that growing adoption of artificial intelligence could make legacy software products obsolete. Di Pizio takes the opposite view: Microsoft's large customer base gives it an advantage in selling AI products, both in software and in cloud computing.
Copilot adoption in focus
Microsoft embeds its Copilot assistant free in Windows, the Edge browser, and Bing, and sells it as a paid add-on to the 365 productivity suite. Companies pay for more than 400 million 365 licenses, each a potential Copilot customer.
By the end of the fiscal third quarter, ended March 31, enterprises had added Copilot to 20 million licenses, up 250% year over year. Di Pizio says further triple-digit growth could shift the view of some of the more bearish investors when Microsoft reports on July 29.
Azure and the order backlog
Microsoft is working to double its data center footprint over the next two years to meet AI demand. As of March 31, it held a $627 billion order backlog from customers waiting for more capacity, a figure that doubled from a year earlier.
Azure revenue rose 40% year over year in the third quarter, an acceleration from 39% growth the prior quarter. Microsoft thinks it can convert the entire backlog into revenue over the next two and a half years.
A cheaper valuation than peers
The decline has pushed Microsoft's P/E ratio down to 22.9, below the Nasdaq-100 index at 34.5. On Wall Street's fiscal 2027 estimate, its forward P/E is 19.9.
To match the Nasdaq-100's 34.5 multiple, the stock would have to soar 73% over the next 12 months if that estimate holds, Di Pizio writes. He notes Microsoft averaged a P/E of 32.7 over the last 10 years.
Source: The Motley Fool
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