After 30% Drop, Is It Time to Buy Microsoft?

Microsoft’s stock has been under notable pressure this year. From its all-time closing high of $542.07 on October 28 last year, it fell to a low of $356.77 on March 27, marking a cumulative decline of 34.2%. However, recent price action shows signs of bottoming and rebounding.

The key question now is: is this a buy-the-dip opportunity for Microsoft?

Bernstein analyst Mark Moerdler remains firmly bullish, arguing that the current level represents a reasonable entry point for investors looking to accumulate the stock.

The core concern among investors centers on the apparent mismatch between Microsoft’s massive capital expenditures and the growth rate of its Azure cloud business. Moerdler explains that there are several valid reasons why this capex has not yet translated into Azure revenue growth.

A significant portion of computing power is likely being allocated to training Microsoft’s proprietary models and supporting first-party applications such as Office and Copilot. These investments, while substantial, do not immediately show up as external cloud service revenue.

The critical factor, therefore, is timing. According to Moerdler, there is typically a lag of about six months between hardware procurement and the point at which servers begin generating revenue. “This transition began roughly two quarters ago,” he notes, adding that Microsoft may soon start to see returns on these investments.

If this view proves correct, signs of accelerating Azure growth could begin to emerge in earnings reports over the next two quarters.

Some analysts also maintain a relatively constructive outlook on Microsoft’s medium-term prospects, citing the structural advantages of its business model.

Billy Fitzsimmons of Piper Sandler noted in a recent report that while market concerns over capital expenditures are justified, Microsoft remains one of the most defensive names in the software sector.

The core thesis is that Microsoft is uniquely positioned to directly monetize AI demand through its Azure cloud infrastructure, while underlying end-market demand for Azure remains robust.