MSFT Stock Lags Peers Amid AI-Fueled Growth

Microsoft's (MSFT) stock has been lagging behind its peers despite delivering strong fundamentals. The company's operating margin of 47% is the highest in its competitive set, and revenue grew 17.8% over the last twelve months, second only to Alphabet.

The market has rewarded this performance with a premium price for Microsoft, trading at 28.1 times earnings. This is significantly more expensive than Alphabet's 17.8 multiple, yet MSFT's stock has performed far worse over the past year, with a -2.1% return compared to Alphabet's +82%.

The market is betting on an AI-fueled transformation, and management's commentary has been dominated by explosive growth in its AI-centric businesses. Revenue from Azure and other cloud services grew 43%, a significant acceleration.