Highly Regarded

Is Microsoft Corporation (MSFT) Stock Undervalued or Overvalued?

Trailing-twelve-month multiples vs Technology sector peers in our coverage

70% Discount TTM fundamentals · sector averages from covered peers

MSFT trades at 24.2× TTM earnings — a 70% discount to its Technology sector average of 81.0× in our coverage.

The Numbers

P/E (TTM)

24.2×

Sector avg: 81.0×

P/S (TTM)

9.4×

Sector avg: 18.7×

Market Cap

$2.87T

EPS (TTM): $15.98

Revenue (TTM)

$305.45B

Net income: $119.26B

Technology Peer Comparison

How MSFT's multiples stack up against sector peers we cover. Click any peer for its own valuation breakdown.

Stock Price P/E (TTM)
MSFT This page $386.79 24.2×
NVDA $195.52 48.4×
AAPL $312.73 39.6×
AVGO $373.72 78.3×
AMD $551.70 208.2×
INTC $122.14 —
CSCO $113.98 44.0×
ORCL $143.82 33.3×
PLTR $132.53 308.2×
TXN $303.53 55.7×
QCOM $186.38 37.7×
CRM $165.63 24.0×
ADBE $218.11 13.1×

Is the Discount Justified?

July 6, 2026

Microsoft's P/E ratio of 24.2x, significantly below the stated sector average of 76.3x, suggests a more conservative valuation relative to some technology peers, or a potentially skewed sector average. The company's valuation is underpinned by robust growth in its cloud segment, with Azure revenue accelerating by 40% in Q2 FY26. Microsoft's strategic investments in AI are yielding substantial returns, with its AI business achieving an annual revenue run rate of $37 billion, driven by strong adoption of Azure AI services and Microsoft 365 Copilot. Diversified revenue streams, including enterprise software and the growing Xbox content and services post-Activision Blizzard acquisition, contribute to its strong financial performance, justifying its valuation based on consistent growth and market leadership.

Sources

Frequently Asked Questions

Is MSFT overvalued or undervalued?
On trailing-twelve-month earnings, MSFT trades at 24.2x versus a Technology sector average of 81.0x in our coverage — a 70.1% discount. Whether that's justified depends on growth, margins, and risk; see the context above.
What does the P/E ratio tell you?
Price-to-earnings compares a company's share price with its per-share profits. A higher multiple means investors pay more per dollar of earnings — often for faster expected growth — while a lower one can signal slower growth or higher perceived risk.
Why compare against the sector average?
Valuation multiples vary structurally between industries — software typically trades richer than banks or energy. Comparing MSFT with its own Technology peers is more informative than comparing against the whole market.
Is a cheap stock automatically a good buy?
No. A discount can be justified by weak growth or elevated risk (a "value trap"), and a premium can be earned by quality and consistency. Valuation is one input — pair it with the fundamentals and the AI context on this page.

Methodology

Multiples are computed from trailing-twelve-month fundamentals (from company filings) and the latest share price: P/E is price ÷ diluted EPS, and P/S is market cap ÷ revenue. Sector averages use the Technology names in our 50-stock coverage with positive earnings — a deliberately like-for-like, if imperfect, benchmark.

Stocks with negative trailing earnings are compared on price-to-sales instead. Multiples update with prices and fundamentals; AI context refreshes weekly.

Not Financial Advice

This page is for education and information only. Indicators are mechanical calculations, AI commentary can contain errors, and nothing here is a recommendation to buy or sell any security. Do your own research and consider consulting a qualified financial advisor. See our full disclaimer.

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