Microsoft Slumps Below S&P 500 Valuation as Growth Continues

Microsoft's stock price has dropped significantly over the past year, falling around 30% from its all-time high in July 2025. Despite this decline, the company's latest quarterly results showcased a strong and growing business, with AI revenue rising 123% year-over-year to a $37 billion annual run rate.

The cloud computing division also saw significant growth, increasing by 40%. Overall, revenue rose 18%, with earnings per share up 23%. These numbers suggest that Microsoft is undervalued compared to its big tech peers, which trade at multiples in the mid-to-high 20s. In contrast, Microsoft's forward earnings are valued at less than 20 times.

This valuation is significantly lower than the S&P 500, which trades for about 21.7 times forward earnings. Management will report earnings on July 29, and if they meet expectations, it could be enough to turn around the stock due to its low price tag.