Microsoft (NASDAQ: MSFT) roars back. Since the start of April, the stock is up more than 14% as of this writing. However, the tech leader is still down more than 20% from its all-time high in October 2025. Can Microsoft maintain its recent momentum, or will ongoing developments — including inflation and geopolitical tensions — push the stock back down? It is difficult to predict what will happen in the next few months. But for investors focused on the long game, there are good reasons to think it’s still time to buy the dip. Here are three of them.
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One reason some investors are worried about Microsoft’s prospects is that they believe the company’s services will be replaced by artificial intelligence (AI). It’s not just Microsoft either. Many software stocks have struggled for this reason. However, how likely is it that AI will actually make Microsoft products obsolete? Long ago, some people feared that the same thing would happen Alphabets.
They thought that AI chatbots would disrupt the company’s search industry, which it monopolizes. Since Alphabet generates most of its revenue through search-related advertising, that would be a significant blow to the business.
Besides, things didn’t turn out that way at all. Alphabets have changed, incorporating AI into its search capabilities, and, if anything, the technology has improved the company’s business. Now, there are many differences between Microsoft and Alphabet. That the latter is practiced does not mean that the former will, either. However, Microsoft has a deep tradition of innovation and large, established relationships with businesses.
Those two benefits would allow the company to keep up with the threat posed by AI, update its services with that in mind, and maintain a strong share of its core markets. Microsoft has already started doing that. The company’s Copilot is an AI assistant integrated into the entire production suite. The tech giant will likely continue to find new ways to keep the AI threat at bay. In my opinion it will succeed.
Investors who aren’t worried about inflation or potential inflation should consider Microsoft. It may be a fairly volatile technology stock compared to many companies in more defensive industries, but several aspects of its business should allow it to weather stressful economic conditions much better than many of its peers. Consider, for example, that the majority of Microsoft’s revenue comes from subscriptions, which include individuals, businesses of all sizes, and even government or non-profit organizations.
That gives the company a large base of recurring revenue, much of which should remain intact even in a recession. In addition, Microsoft arguably benefits from pricing power, enabling it to pass on some of the cost increases to its customers without major exits. Microsoft is also a great dividend stock. The company has increased its payouts by nearly 153% over the past 10 years. This is important because if economic problems lead to a market crash, regular returns can help offset the market’s losses. And we have little reason to believe that Microsoft will stop its payments.
The company’s fundamental business is strong, supported by a AAA rating — the highest available — from S&P Global, as well as significant free cash flow and a very conservative payout ratio of 33.6%. All of that makes Microsoft a great stock to buy now.
Even after its performance over the past two weeks, Microsoft’s stock remains reasonably priced compared to its Magnificent Seven peers.
MSFT PE Ratio (Forward) data via YCharts
Microsoft isn’t the cheapest in this group based on its forward earnings (P/E), but it’s not the most expensive either. Even setting aside externalities, TeslaMicrosoft’s forward IP/E is currently below the average of the remaining six. Microsoft may or may not maintain its recent momentum over the next few months, but the company’s long-term prospects remain attractive. And those who buy its shares at current levels will likely be glad they did so in 10 years.
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Prosper Junior Bakiny has positions in Alphabet, Amazon, Meta Platforms, and Nvidia. The Motley Fool has positions and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla and is short Apple shares. The Motley Fool has a policy of disclosure.
3 Reasons It’s Not Too Late to Buy a Dip in Microsoft was originally published by The Motley Fool
