Microsoft Corp. (NASDAQ: MSFT) shares closed at approximately $497 on September 2, 2026, maintaining the same value as at the start of the year, but marking a significant turnaround for investors who experienced a nearly 30% dip earlier in the year. A robust post-earnings rally erased these losses in a single session, largely driven by strong performance in Microsoft’s Azure cloud business.
Despite initial concerns regarding AI spending and the adoption of Microsoft Copilot, these fears are gradually diminishing. The latest earnings report showcased accelerated growth in Azure, which achieved over $100 billion in annual revenue for the first time, growing 43% from the previous quarter. The company’s management has projected a similar growth rate for the upcoming quarter, indicating that demand is outpacing infrastructure expansion rather than declining.
An impressive backlog of $678 billion in commercial remaining performance obligations (RPOs) further highlights the strength of demand outside of just AI labs, countering bearish arguments surrounding Microsoft’s cloud business. However, despite these promising figures, Microsoft’s stock remains undervalued relative to its past performance, trading at approximately 26 times forward earnings, below its five-year average.
As Microsoft continues to invest heavily in capital expenditures, with a revised outlook of about $175 billion for 2026, there are concerns regarding the sustainability of this growth. Investors are advised to monitor whether current momentum in Azure and the backlog translates into recognized revenue, as any slowdown could impact stock performance.
The ongoing gap between Microsoft’s solid fundamentals and investor sentiment remains a critical issue to watch as the company prepares for its next earnings report in late October.
Why this story matters
Key takeaway
Opposing viewpoint
