Microsoft (MSFT) is making headlines after unveiling new features for its Dragon Copilot clinical assistant, designed to bring ambient AI capabilities directly into nursing workflows. The company’s latest wave of healthcare partnerships highlights how its AI tools are quickly integrating into real-world clinical operations and opening up fresh monetization streams.
See our latest analysis for Microsoft.
Momentum continues to build for Microsoft, with a string of high-profile healthcare AI partnerships and fresh product rollouts reinforcing its leadership story. Despite robust market gains, the stock has delivered a 22% total shareholder return over the past year and a remarkable 153% total return over five years. This is evidence of both short- and long-term strength as investors increasingly reward innovation and AI scale.
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Yet with so much innovation already reflected in Microsoft’s rally, the central debate for investors now is clear. Is Microsoft undervalued against its long-term AI leadership, or are markets already pricing in the company’s next leg of growth?
Microsoft’s trading price of $517.66 stands well above the fair value calculated in the most-watched narrative on Simply Wall St. This suggests strong optimism is already factored in. To understand why, it helps to see how this narrative views Microsoft’s future growth and sources of competitive advantage.
Overall, Microsoft remains one of the most compelling large-cap investments. The company offers a rare blend of profitability, structural growth drivers (AI, cloud, SaaS), pricing power, and resilience. It is on track to surpass a $5 trillion market cap within five years, assuming continued execution and supportive market conditions.
Curious about the financial engine behind such an ambitious forecast? The full narrative hints at a potent mix of global tech dominance, tight margins, and an earnings growth outlook that could surprise skeptics. Discover the precise assumptions locking in this high-stakes valuation and see what could make or break the story.
Result: Fair Value of $360 (OVERVALUED)
Have a read of the narrative in full and understand what’s behind the forecasts.
However, risks such as delayed AI monetization or rising regulatory pressure could challenge Microsoft’s ambitious forecasts and temper its projected upside.
Find out about the key risks to this Microsoft narrative.
Taking a look through the lens of the price-to-earnings ratio, Microsoft trades at 37.8x earnings. This is a notch above the US Software industry average of 35.2x, but still below its own fair ratio of 56x and slightly cheaper than the average peer at 38.6x. While this could hint at potential upside, the gap between current and fair ratios suggests valuation risk can swing both ways. Will the market reward Microsoft’s AI bets with a higher multiple, or are expectations already stretched?
See what the numbers say about this price — find out in our valuation breakdown.
NasdaqGS:MSFT PE Ratio as at Oct 2025
If you see the story differently or want to dive deeper into the details, building your own perspective is quick and straightforward. Just take a few minutes to explore the data your way with Do it your way.
A great starting point for your Microsoft research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include MSFT.
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