Microsoft (MSFT +1.62%) has had a rough few months. The stock is down over 30% from its all-time high, and has seen a much deeper sell-off than most of its peers. However, I think there could be a turnaround coming.
On April 29, investors will get the next round of news from Microsoft regarding the current state of its business -- that is, its fiscal 2026's third quarter (ended March 31). I think the results from that report could be exactly what Microsoft needs to turn its fortunes around, making the stock a no-brainer buy right now.
Image source: Getty Images.
What's going to be in the report?
The reality is that Microsoft doesn't really need anything particularly special in its report; it just needs to keep the status quo.
During Q2 (ended Dec. 31, 2025), Microsoft delivered excellent results, with its revenue rising 17% powered specifically higher by higher revenue from Azure, which rose 39%. Azure is Microsoft's cloud computing platform, and has become the go-to partner for building and developing AI models. As this segment of Microsoft's business grows, it shows that Microsoft is still in the middle of the AI build-out and making a ton of money from it, too.
So, as long as Microsoft delivers solid revenue numbers (Wall Street believes Microsoft will report 16% growth), and Azure continues to deliver strong growth, I don't think there's anything that will keep the stock down. The reality is that the stock is so cheap right now that it doesn't really have anywhere to go but up.
NASDAQ: MSFT
Key Data Points
The most widely used valuation metric is the price-to-earnings (P/E) ratio. It's not always the best choice for certain situations, but with a mature company like Microsoft, I think it's fairly appropriate. From this standpoint, Microsoft trades for 23.3 times earnings. Just last year, it traded for nearly 40. Now, I'm not going to argue that Microsoft was worth 40 times earnings, but I think 23 times earnings is far too cheap.
The S&P 500 trades for 24.5 times earnings, so it's already cheaper than the broader market. Two of its peers, Alphabet and Apple, trade for 29.2 and 33 times earnings, respectively. I'd argue that Microsoft deserves a 30 P/E multiple, which indicates substantial upside from the stock.
Will Microsoft recover that all in one day? I doubt it. But could its stock pop 10% on a solid earnings report? I think that's entirely possible, as Microsoft's stock is truly valued at a dirt cheap level.
