When you think about computer software, Microsoft (MSFT 0.36%) is certainly one of the first companies that comes to mind. Microsoft has made a fortune from its Microsoft 365 suite of applications, which includes programs such as Word, Excel, PowerPoint, Outlook, and Teams -- all of which are important for any business setting.
Microsoft has become a computing powerhouse that also sells personal computers, operating systems, tablets, and gaming consoles, as well as the LinkedIn social media platform, the Edge browser and the Bing search web engine. Through its early investment in OpenAI, the makers of ChatGPT, it's working closely in the field of artificial intelligence, bringing the revolutionary technology to bear to help users boost productivity and automate tasks. And it's a major hyperscaler through its Microsoft Azure cloud computing division, which is addressing a growing need for data center capacity as companies seek to leverage AI applications in their operations.
NASDAQ: MSFT
Key Data Points
This is the fourth in a series of articles in which I'm ranking the best "Magnificent Seven" stocks to buy for 2026, in reverse order. In previous installments, I unveiled Apple as my No. 7 choice, Amazon in the No. 6 spot, and Tesla as the fifth-ranked stock.
Here's why I'm ranking Microsoft, which has a market capitalization of $3.6 trillion, as the No. 4 Magnificent Seven stock to buy for 2026.
Image source: Getty Images.
About Microsoft stock
Microsoft, headquartered in Redmond, Washington, has become a leading AI stock. In addition to its cloud computing services, Microsoft was an early adopter in incorporating generative AI into its search engine. It also rolled out Microsoft Copilot as a generative AI tool for its Microsoft 365 products.
"Our planet-scale cloud and AI factory, together with Copilots across high-value domains, is driving broad diffusion and real-world impact," CEO Satya Nadella said. "It's why we continue to increase our investments in AI across both capital and talent to meet the massive opportunity ahead."
The company operates in three primary business segments: Productivity and Office Processes, which includes Microsoft 365 suite and LinkedIn; Intelligent Cloud, which includes Azure and cloud services; and More Personal Computing, which includes Windows, Bing, Surface devices, and Xbox gaming consoles.
That combination has led to rapid growth for Microsoft over the last decade, with revenue increasing by more than 230% during that period. Earnings per share and net income are both up more than 500%.
MSFT Revenue (Annual) data by YCharts
In 2025, shares are up 15%, which roughly equals the growth of the S&P 500 index. Earnings for the first quarter of fiscal 2026 (ended Sept. 30, 2025) showed revenue of $77.7 billion, up 18% from a year ago. Net income was $27.7 billion, up 12%, and earnings per share of $3.72 was up 13% from the previous year.
|
Segment |
Q1 2026 Revenue |
% Revenue Change from Q1 2025 |
Q1 2026 Operating Income |
% Operating Income Change from Q1 2025 |
|---|---|---|---|---|
|
Productivity and Business Processes |
$33.02 billion |
16.6% |
$20.41 billion |
23.5% |
|
Intelligent Cloud |
$30.89 billion |
28.2% |
$13.39 billion |
27.5% |
|
More Personal Computing |
$13.75 billion |
4.4% |
$4.16 billion |
17.8% |
Source: Microsoft
The lucrative Intelligent Cloud segment is growing rapidly, and if it maintains this growth trajectory, it will surpass Microsoft's signature productivity software tools as its most lucrative segment.
Why Microsoft deserves the No. 4 spot
All of the Magnificent Seven stocks are excellent companies, and each is a worthy addition to any portfolio. But when you're looking at the seven companies as a grouping, Microsoft is squarely in the middle of the pack.
I believe it has a stronger growth engine than Apple, a more effective business model (with higher profit margins) than Amazon's massive e-commerce division, and is less volatile than Tesla. But at the same time, the remaining companies on this list (Nvidia, Alphabet, and Meta Platforms) have what I see as more dynamic opportunities to grow in 2026. That's why I'm putting Microsoft in the No. 4 spot.
If you're looking for a solid, reliable, but not explosive Magnificent Seven stock for 2026, Microsoft is a good bet.
