Microsoft (NASDAQ: MSFT) has had a rough 2026. Its stock is down over 25% from its October highs, with the majority of that decline occurring in 2026. It’s not often you see a well-established tech player like Microsoft decline so much, and it’s even more rare to see it occur for no obvious reason.
This opens up a great buying opportunity for one of the most dominant tech companies out there. I think an investment now could help set you up for life, as it could provide market-beating returns over the next few years.
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The gold standard for comparing individual investing performance is the S&P 500. If you’re beating the S&P 500, then you’re doing a great job. Historically, the S&P 500 has returned around 10% annually. So, if you invest $500 a month in the S&P 500 and compound it over 29 years, congratulations, you’re a millionaire.
Now, what happens if you can beat the S&P 500 by three percentage points annually? Well, now you’ve reduced that time to 25 years. While that may not sound like a lot, the difference becomes even more stark if you increase that 13% rate of return to 29 years. At the end of 29 years, the 10% rate of return yields $1.017 million, while the 13% return yields $1.915 million. That’s nearly double the money, so finding stocks that can consistently beat the market can be a winning investing strategy.
A big part of this is finding stocks that are on sale for no good reason. I believe Microsoft falls into this category.
Its base software business continues to thrive, as does its approach to artificial intelligence (AI). Microsoft is acting more as an AI facilitator and offers several different generative AI models on its cloud computing platform, Azure. Azure also continues to grow at a rapid pace, and has a massive backlog of workloads it’s trying to bring online.
In Q2 of fiscal year (FY) 2026 (ending Dec. 31), Microsoft delivered an impressive 17% year-over-year revenue growth. That doesn’t sound like a company that deserves to be down more than 25% from its all-time high, especially when it doesn’t have a premium valuation.
Microsoft now trades for 24 times forward earnings, the cheapest it has been in nearly three years. It’s also not far off the S&P 500, which trades for 21.9 times forward earnings.
