Is Microsoft Stock an Undervalued Stock to Buy? | MSFT Stock Deep Dive Part 4

追加: 2026-05-07

[00:00:00]In part four of my deep dive into Microsoft stock, we're going to look at its various business segments and consumer products and business products and how they're performing.

[00:00:09]I'll finish by sharing with you my fair value calculation for Microsoft and update you on my buy, hold, or sell rating.

[00:00:17]I want to thank The Motley Fool for sponsoring this video. Visit fool.com/par Kev for the 10 best stocks to buy now. Microsoft provided investors an update on just how many active Windows devices there are around the world, and that figure surpassed 1.6 billion. That's a massive amount. That's a huge installed base of consumers that are familiar with its Windows software.

[00:00:46]And that's also a huge installed base of people that are purchasing uh supplementary products to Windows, right? If you have a Windows device, you're more likely to have a Microsoft 365 consumer account. You're not more likely to use its Edge browser. You're more likely to use other Microsoft products if you have a Windows-based device.

[00:01:13]And in fact And in fact, its search engine Bing surpassed monthly active users of 1 billion for the first time.

[00:01:23]>> [snorts] >> That's more than I thought the company had in its search engine.

[00:01:28]It's also surprising to me that LinkedIn has 1.3 billion members. Now, they're careful not to say monthly active. I don't think they have 1.3 billion monthly active members because that would make them that would make LinkedIn the second largest social media platform behind Meta Platforms. I think their monthly active figures are significantly below the total figures, but the total figure of 1.3 billion is large and it as they innovate here, they can engage more of these individuals and make them use the platform more frequently and get them engaging and generating more revenue for In Microsoft 365 consumer, they now have nearly 95 million subscribers, and early signals show increasing satisfaction as they make agent mode the default.

[00:02:27]So, they're incorporating AI into their productivity suite with Word, Excel, PowerPoint, etc. As is Google with its productivity suite with Google Docs, Google Slides, and Google Sheets. Um more individuals are using Google services because they are offered for free, while Microsoft 365 is a paid product.

[00:02:52]>> [snorts] >> In the most recently completed quarter, Microsoft delivered results that exceeded expectations across revenue, operating income, and earnings per share.

[00:03:03]And the company's accelerating the pace of innovation.

[00:03:07]And I would say that's the case across the board with technology companies.

[00:03:11]Artificial intelligence is allowing companies to accelerate the pace of innovation.

[00:03:17]Whereas formerly, you know, companies like Nvidia and AMD would produce a next-generation product every 2 years, they're now producing a next-generation product every 1 year. And that's accelerating the pace of uh cutting-edge technology that companies like Microsoft are able to incorporate into their own services and accelerate their own pace of innovation.

[00:03:45]Overall revenue was $82.9 billion, which is up by 18% year over year.

[00:03:52]For the full year uh in the upcoming year, I was forecasting Microsoft's revenue would grow closer to 15% rather than 18%. So, this most recently completed quarter, the company was certainly ahead of expectations in terms of overall revenue.

[00:04:10]Operating income increased by 20% and and it was good to see operating income increased by more than revenue. Again, the company is spending a lot of money on artificial intelligence. So, there were a few quarters where their operating income increased by less than their revenue because they were spending more and their spending increases were growing more than their revenue increases were growing. Earnings per share came in at $4.27, which increased by 21% from the same time the year before. As I mentioned, they are spending a lot more money on artificial intelligence and computing, and so their gross profit margin at 68% was down year over year.

[00:04:53]Operating expenses increased by 9%, which was less than the operating expense growth at companies like Meta Platforms and Amazon. So, their operating profit margins did increase slightly year over year to 46%.

[00:05:10]Now, 46% operating profit margin is an absolutely excellent operating profit margin, and it's the envy of most businesses around the world. Very few companies have an operating profit margin above 46%, and the best of the best right now is around 65%, but that figure is slightly increasing in recent quarters as tech companies like Nvidia are improving profitability, meaningfully surpassing previous leaders like Visa, which have stagnated a little bit in their operating profitability. Here's one of the benefits of artificial intelligence.

[00:05:50]Microsoft is able to have fewer employees. Their total company head count declined year over year, even as revenue increased by nearly 20%. As they focus on building high-performing teams that operate with pace and agility.

[00:06:07]Companies like Microsoft are careful not to say that their investments in AI allow them to let go of individuals and generate more profits. But overall, my fair value calculation for Microsoft is $447 compared to the current market price of $415.

[00:06:28]The stock looks undervalued, and I reiterated my top 15 stock rating for Microsoft stock after evaluating these results.

[00:06:38]But before you make a decision on Microsoft stock on either buying or selling, I suggest you finish all the parts of my deep dive into Microsoft's latest results. The next part in this series is popping up on your screen. I suggest you click that, and I'll see you over there shortly.