Can Microsoft Stock Surge to a New All-Time High by the End of 2026 as Azure Cloud Demand Accelerates?
Key Points
Microsoft is trading at a valuation that's below its normal range.
Microsoft is seeing sales strength from Azure and Copilot.
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Microsoft (NASDAQ: MSFT) has been nearly dead money so far in 2026. It's up around 4% year to date, but only thanks to a surge in recent days and months. Prior to the company reporting its earnings results for the fourth quarter of fiscal year 2026 (which ended June 30), the stock was down by more than 20% for the year. That quarterly report jump-started Microsoft's stock, but it's still down by more than 5% from the all-time high it established last year around this time.
Can Microsoft reach a new all-time high before 2026 is over? I think it can, and it's all because of Azure.
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Microsoft's cloud revenue growth is impressive
Microsoft is one of the big four hyperscalers, and it has spent hundreds of billions of dollars in recent years on AI data centers. While it's not the biggest spender of the four, it has still been laying out a ton on capital expenditures, and the fruits of those investments are starting to show up in its results. Azure, Microsoft's cloud computing platform, saw revenue growth of 43% year over year in fiscal Q4.
As more of Microsoft's new data centers come online, Azure's revenue will rise due to increased supply. There's a ton of demand out there right now for cloud computing power, and with Azure being one of the largest cloud computing providers -- it boasts a 21% market share -- it will benefit.
Microsoft's Copilot product is also being widely adopted, with over 30 million paid seats. All of this shows that Microsoft's AI plans are working out, which suggests that it's only a matter of time before the stock rises to a new all-time high.
Additionally, on a forward price-to-earnings basis, Microsoft's stock is trading below where it normally does. For the past three years, Microsoft has averaged a valuation of about 29 times forward earnings. Now, it trades for 25.6.
MSFT PE Ratio (Forward) data by YCharts.
If all Microsoft did was rise from its current valuation to its average one, the stock would rise by more than 10%, which would put it at a new all-time high. So, I think it's well within Microsoft's grasp to achieve a new record share price before 2026 is over, but is that a good enough reason to buy the stock?
Microsoft is a solid AI stock pick, but I think there are better ones out there. The time to buy Microsoft was in July, not now. I think there are several other stocks that are growing faster and are more attractive than Microsoft, and even though it's in line to set a new all-time high, I'm not sure whether it can deliver impressive returns after that. As a result, I'm passing on Microsoft and looking at other top AI stock picks instead.
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Keithen Drury has positions in Microsoft. The Motley Fool has positions in and recommends Microsoft. The Motley Fool has a disclosure policy.
