Is Microsoft the Best "Magnificent Seven" Stock to Buy Right Now?

By Keithen Drury | May 09, 2025, 7:00 AM

Cloud was the strong spot for Microsoft

Microsoft is much more than the company that makes Word and Excel software programs. Its business sprawls from LinkedIn to cloud computing to gaming, with its Xbox platform and Activision Blizzard acquisition. In Q3, all of them saw solid results, with intelligent cloud being the best performer, posting 21% revenue growth. This segment has been the star of the show for the past several years, as it includes Microsoft's most important growth engine: Azure.

Azure is Microsoft's cloud computing division. It was Microsoft's fastest-growing segment overall, rising at a 33% pace. This division will likely continue to be the leader for the foreseeable future, as it has two significant tailwinds pushing it higher: artificial intelligence (AI) workloads and general migration to the cloud. The industry is still a long way away from businesses completely moving their workloads to the cloud, and this shift is expected to continue throughout the next decade.

If you exclude the cloud products, Microsoft's results become a bit more dull, with productivity and business processes only rising 10% year over year and more personal computing up 6%. However, the strength of Microsoft's cloud business was enough to cause overall revenue to rise 13% year over year, with net income increasing an outstanding 18% year over year.

It's pretty simple: Microsoft's business goes where cloud computing goes. Luckily for Microsoft, cloud computing is strong and will likely be so over the next decade. While this really isn't luck, as CEO Satya Nadella has wisely positioned Microsoft to be in this spot, it bodes well for shareholders.

But does that make Microsoft the best company to buy in the Mag Seven right now?

Microsoft is an expensive stock for its growth

There are some heavy hitters in the Magnificent Seven, so just because a company may not be the best stock to buy doesn't mean that it's a bad stock to buy. Starting at the bottom, Apple has a premium valuation and no growth, and Tesla is having a bit of an identity crisis. Those two certainly move to the bottom of the list.

Comparing valuations with the remaining five, Microsoft is now the most expensive using a forward price-to-earnings (P/E) ratio.

MSFT PE Ratio (Forward) data by YCharts.

While that isn't a nail in the coffin for the argument for owning Microsoft's stock, it disqualifies it from being the best stock to buy in the Magnificent Seven group.

Still, Microsoft is highly valued because it's expected to post among the best growth numbers of the remaining five.

MSFT Revenue Growth Estimate for Current Fiscal Year Chart

MSFT Revenue Growth Estimate for Current Fiscal Year data by YCharts.

Clearly, Nvidia's expected growth throws these charts out of proportion. However, Alphabet also surpasses Microsoft's expected earnings-per-share growth, which is notable because Alphabet is the cheapest stock in this group.

So, where do I think Microsoft falls in the Magnificent Seven buy or sell list? I think Microsoft could be considered a cautious buy, as it is still highly valued. However, it is nowhere near a screaming buy, like I believe that Alphabet and Nvidia are right now. Microsoft is in the middle of the pack, but being in the middle of the pack in a group full of top-tier businesses is an excellent place to be.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Keithen Drury has positions in Alphabet, Amazon, Meta Platforms, Nvidia, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

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