After holding Microsoft (MSFT -0.70%) for more than 10 years, I wouldn't sell a single share, not even today. The company I bought back in 2016 has changed dramatically, but mostly in ways that strengthen the original reason I owned it. Microsoft has shifted from a PC-centric software business to one built on cloud, subscriptions, enterprise software, and artificial intelligence.
So the question now is whether those changes can support another decade of compounding, and whether the stock is still a buy at today's valuation.
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Why Microsoft's 10-year investment case still works
When I first bought Microsoft, the business was much smaller. In fiscal 2016, it generated $85.3 billion in revenue and $20.2 billion in operating income. By fiscal 2026, revenue had reached $331.8 billion and operating income $155.2 billion. Azure alone passed $100 billion in annual revenue.
The bigger change is where that growth came from. Microsoft expanded Microsoft 365, Azure, LinkedIn, Dynamics, GitHub, security, and other cloud products across largely the same enterprise customer base.
That matters over a 10-year holding period, because Microsoft doesn't need every new dollar of revenue to come from a new customer. It can deepen existing relationships by adding more products and services, which gives the company several paths to keep growing.
NASDAQ: MSFT
Key Data Points
Can AI drive Microsoft's next decade of growth?
AI gives Microsoft another opportunity to build on that advantage. In the fourth quarter of fiscal 2026, Azure and other cloud services revenue grew 43%, Microsoft 365 Copilot passed 30 million paid seats, and commercial remaining performance obligations rose 84% to $678 billion. The demand is real. But capturing it takes extraordinary capex.
Microsoft spent $115.9 billion on property and equipment in fiscal 2026, up 80% from the prior year, while operating cash flow rose 34% to $182.9 billion. That raises an entirely different question for a long-term shareholder. Can Microsoft's AI revenue eventually generate enough operating profit and cash flow to justify the infrastructure it's building today? There are encouraging signs.
Microsoft Cloud revenue rose 27% to $59.3 billion, and roughly 90% of full-year Microsoft Cloud revenue came from customers outside frontier model companies. That means the cloud business rests on a broad base rather than a handful of large AI labs. But strong demand still has to translate into strong returns on capital, and that's where the stock's valuation comes in.
Is Microsoft stock still worth buying at its current valuation?
This is where I separate holding Microsoft from buying it aggressively. The stock trades at almost 25 times on a price-to-earnings basis, and about 22 times on a price-to-cash-flow basis. Neither looks unreasonable to me for a company of Microsoft's quality. Meanwhile, a consensus among 51 analysts rates Microsoft a Strong Buy, with only four calling it a hold. One-year price targets imply upside of up to ~40%.
The fact that I've owned the stock for more than 10 years means less than the fact that I care more about the next decade. Still, the valuation gives me reason to be selective about when I add, especially with AI infrastructure demanding this much capital. Microsoft has the scale, recurring revenue, cloud platform, and customer base to keep expanding. And if earnings continue to grow at a double-digit rate, today's multiple becomes less demanding over time.
So I'm comfortable holding every share and adding on weakness rather than chasing the stock. The real opportunity is that Microsoft comes out of this AI investment cycle with a much larger earnings base, while its cloud and enterprise businesses continue to compound. If that happens, today's valuation will look much more reasonable several years from now, and long-term shareholders will get another leg of growth.
