Microsoft Valuation Shift: Writer Reverses Long-held Skepticism

A renowned financial writer has had a change of heart about Microsoft's (MSFT) valuation. For five years, they've been skeptical of the company's high price-to-earnings ratio, but recent numbers and developments have convinced them to reconsider.

Microsoft's revenue climbed 18% to over $331 billion in the fiscal year that ended June 30, while operating income rose 21% to more than $155 billion. Net income hit $133.7 billion, with EPS growth above 20%. These numbers indicate a company still growing rapidly, not one just coasting on its legacy.

The writer was most wrong about Microsoft's AI business, which they initially thought would be 'mostly narrative.' Instead, it has become a concrete and growing business, with revenue reaching $90 billion in the latest quarter, driven by 32% growth in the Intelligent Cloud segment. Azure revenue now surpasses $100 billion annually.

Azure grew 43% year over year in fiscal Q4 2026, and CEO Satya Nadella said Microsoft's custom AI chips can deliver up to 40% better performance per watt, potentially improving cloud margins and earnings. Copilot is the clearest proof that this is real monetization, not just GPU reselling.

The writer notes that while Microsoft trades at a trailing P/E of 28-28.5, which is slightly below its 10-year average of 30, it's not cheap in an absolute sense. For a business with Microsoft's moat and growth profile, however, it looks more like fair value than irrational exuberance.