Microsoft: A Cold Case for Value

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The market, lately, has been throwing tantrums. Artificial intelligence, the new obsession, had everyone seeing dollar signs. A few stocks got inflated like cheap balloons. Now, the air’s leaking out. But a little turbulence doesn’t always mean a crash. Sometimes, it just reveals the solid steel underneath.

I’ve been watching Microsoft. A big, lumbering beast of a company. They took a hit recently, the kind that makes headlines. But a bruise isn’t a fatal wound. It’s an opportunity. And in this town, opportunities are as rare as an honest broker.

A Giant’s Shadow

The sell-off? Simple. They spent money. Thirty-seven and a half billion dollars last quarter, to be exact. Building data centers. The kind of places where the future gets coded. Analysts got the jitters. They like their numbers neat and predictable. Microsoft prefers to build things. It’s a messy process.

Azure, their cloud business, grew a respectable 39%. Not enough to satisfy the fever dreamers, apparently. Demand is still outpacing supply, which is a polite way of saying they can’t build the stuff fast enough. They’re spending to catch up. It’s like trying to fill a bathtub with a firehose.

The increased spending will pinch profits, naturally. Depreciation is a cold, hard fact. Two-thirds of the spending is on the short-lived stuff, meaning the pinch will be felt quickly. But a short-term headache for long-term gain. That’s how the game is played.

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Their remaining performance obligations climbed to $625 billion. That’s a number that could buy a small country. Two hundred and fifty billion of that came from a deal with OpenAI. A lot of hype bundled into one contract. But even without it, they’d still be up 28%. It’s a solid foundation, even if it’s partially built on vaporware.

OpenAI now accounts for 45% of that backlog. A risk, certainly. Putting a lot of eggs in one basket. But Microsoft isn’t exactly known for being reckless. They know how to manage risk. They’ve been around the block a few times.

The software business is holding steady. Despite the whispers that AI will kill off enterprise software. Microsoft hasn’t felt the axe fall yet. Productivity and Business Processes are up 14%. A quiet, steady climb. It’s not glamorous, but it’s reliable.

The high-margin software throws off cash. Enough to fund these data center projects. Even with the increased spending, they still managed $5.9 billion in free cash flow last quarter. That’s a river of money. And rivers eventually flow to the ocean.

The stock trades around $400 a share as of this writing. A forward price-to-earnings ratio of 24. A level they haven’t seen in years. It’s a bargain, plain and simple. A cold case for value. The kind that doesn’t shout for attention, but quietly delivers results. In this market, that’s a rare find. And I intend to keep it on my radar.

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2026-02-11 18:32