Tech Sell-Off Makes Microsoft Stock Look Like a Steal

Core Viewpoint - The technology sector, particularly blue-chip stocks like Microsoft, is experiencing a sell-off, with Microsoft shares down significantly year-to-date despite strong revenue and earnings growth [1][2]. Financial Performance - Microsoft reported Q2 FY2025 revenue of $69.6 billion, a 12% year-over-year increase, with $13 billion attributed to AI initiatives [3]. - The Intelligent Cloud and Productivity & Business Processes divisions saw revenue increases of 19% and 14% year-over-year, respectively [4]. - Non-GAAP earnings per share (EPS) for the quarter were $3.23, reflecting a 10% increase from the previous year [5]. Future Outlook - Microsoft anticipates slower growth in Q3 earnings compared to the prior quarter but expects to maintain double-digit revenue gains [6]. - The company plans to continue significant capital expenditure in AI for 2025, with a profit margin exceeding 35% [6]. Valuation Metrics - As of March 31, Microsoft shares were trading at a trailing P/E ratio of 30.50, above its 15-year average of 23.5 [7]. - The stock is currently trading at an approximate 8.3% discount to its average P/E ratio over the last three years [8]. Analyst Sentiment - Analysts have a consensus price target of $508.86 for Microsoft, indicating a potential upside of 36% from its March 31 close [9]. - Some analysts have set even higher targets, with estimates reaching $550 and $595 [9].