Microsoft now trades at less than 20 times forward earnings, below the S&P 500’s roughly 21.7 times, after a year that left the stock down about 30% from its highs. The Motley Fool’s Keithen Drury argues the discount looks unwarranted given the company’s latest growth figures.
Microsoft has fallen to a rare valuation for a big tech name: less than 20 times forward earnings, cheaper than the broad S&P 500 itself. The stock last set an all-time high in July 2025 and nearly matched it last October, but it now sits down around 30% from those levels.
A discount to the market and its peers
Motley Fool analyst Keithen Drury points to forward earnings as the clearest gauge, arguing the company’s above-average growth and one-time investment gains distort its trailing figures. On that measure, Microsoft trades cheaper than at any point in the last three years.
The gap widens against rivals. The S&P 500 trades for about 21.7 times forward earnings, while peers such as Alphabet, Amazon, and Apple sit in the mid-to-high 20s. Apple runs all the way to 36 times forward earnings, leaving Microsoft looking undervalued by comparison.
Growth that the price does not reflect
The latest quarter offered little to justify the sell-off. Microsoft’s artificial intelligence revenue rose 123% year over year to a $37 billion annual run rate. Its cloud computing division grew 40% over the same period.
Overall revenue rose 18%, with earnings per share up 23%. Drury reads those results as reason for the stock to trade closer to its peers. Management reports earnings on July 29, a print he expects could shift sentiment given how low expectations have fallen.
Source: Yahoo Finance
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