‘This Isn’t the Time,’ Says Investor About Microsoft Stock (MSFT)

Microsoft (NASDAQ:MSFT) stock is a clear example of what happens when powerful growth from a tech heavyweight runs into a more challenging market backdrop.

The shares have been sliding for months, pressured by growing anxiety over AI-related spending, lingering concerns about a broader rerating in software stocks, and a gloomy global outlook tied to the ongoing conflict in the Middle East.

Yet, the business itself is doing almost everything right. Microsoft delivered fiscal second-quarter revenue of $81.3 billion, up 17% year-over-year, while operating income climbed 21% to $38.3 billion. Moreover, visibility into future growth remains strong, with Microsoft Cloud’s remaining performance obligations surging 110% to $625 billion by the end of 2025.

So, is the market overlooking the company’s underlying strength? Not everyone sees it that way.

For now, at least, investor Bernard Zambonin is staying cautious and doesn’t view the current dip as an opportunity to load up.

“With the multiple compressions on visibility rather than growth, I prefer to wait for clearer evidence that CapEx, Azure, and Copilot are translating into tangible results before stepping in,” explains the 5-star investor.

Zambonin argues that Microsoft is walking along a multi-pronged AI road. These dual paths consist of its ability to both monetize AI infrastructure on the one hand (i.e., Azure) and the application layer on the other (such as Copilot).

As such, the market first wants to see Microsoft turn its billions in capex spending on data centers into revenue and margin. During the so-called “second act,” investors will be looking for evidence that the company’s AI play will expand both enterprise usage and drive premium pricing.

Though revenues are projected to increase in the mid-teens in the years ahead, last quarter’s capex of $37.5 billion represented 66% year-over-year growth. That disconnect is a red flag for Zambonin.

The investor, therefore, argues that MSFT is stuck in a sort of “limbo,” as the narrative of AI growth is misaligned with the current numbers. In that sense, Zambonin wants to wait for a clear demonstration that the AI growth case is delivering (along with more disciplined capex spend).

Therefore, even though he believes MSFT is “cheap,” he’s sitting this one out.

“The bottom line is not about paying the lowest price but paying for the moment when the thesis works again,” concludes Zambonin, justifying his Hold (i.e., Neutral) rating on the shares. (To watch Zambonin’s track record, click here)

That stance looks pretty cautious compared to the broader view. MSFT is still getting plenty of support from Wall Street, with 35 Buys against just 3 Holds, giving it a Strong Buy consensus. The average 12-month price target of $580.84 points to upside of ~57% from current levels. (See MSFT stock forecast)

Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.