Microsoft is more technically interesting after its earnings than it's been in a long time. Still, I don't see the stock as a long-term value investment. The valuation is too rich for me, given the elephant in the room.

Microsoft delivered this past week, and how: the positive reaction to Wednesday's fourth-quarter results for fiscal year 2025/26 makes that clear. Revenue rose 18% to $90 billion, well above the analyst consensus of about $87.7 billion. Adjusted earnings per share came in at $4.74, versus expectations of $4.24. The cloud remains the driver: Azure grew 43% for the quarter, and full-year revenue for the segment topped $100 billion for the first time. Commercial bookings jumped 84% to $678 billion, a clear sign that demand for cloud and AI services isn't slowing.

Technically, the stock has reclaimed its 200-day moving average. To me, that's a technically relevant signal that could trigger further buying in the near term. The next hurdle I see is the early-June interim high of $458.27. A sustained break above that would, in my view, complete a bottoming pattern, opening up initial upside toward the all-time high of $555. From a purely technical trading standpoint, I find that quite promising, and I could see myself taking a short-term position if the right signal comes.

As a longer-term investment, though, I still don't see Microsoft that way. The P/E ratio currently sits at 25.8, above the historical average of 22. The P/CF ratio of 18.1 is also above its long-term average of 16.6. That valuation simply leaves me too little cushion for the enormous investment in AI infrastructure, which I see as the real risk. For the current quarter alone, Microsoft has announced spending of more than $50 billion, up from $41 billion in the quarter just ended. I think that spending makes sense, it's what it takes to keep pace in the AI era. Still, those sums aren't hitting the income statement yet, but they will weigh on results through rising depreciation down the road. For the current valuation to hold up, those investments need to generate enough revenue to more than offset that depreciation. That's exactly where I'm skeptical long term, and at the current valuation, I don't think this risk is priced in enough.

I think it's likely Azure delivers the roughly 45% growth guided for the current quarter. That won't get the elephant out of the room though, it'll just make it slower to spot. As long as the depreciation from the ongoing billions in investment hasn't shown up in the numbers yet, how big it really is stays an open question. Technically, MSFT stock remains one I'm watching for a possible short-term trade. For a long-term investment, though, the current valuation doesn't do it for me given that uncertainty.

Is Microsoft stock a buy? At current levels, I don't consider Microsoft (MSFT) a buy for a long-term portfolio. The stock trades at a P/E ratio of 25.8, above its historical average of 22, and a P/CF ratio of 18.1, also above its long-term average of 16.6, despite a strong fourth quarter with Azure growing 43% and revenue up 18% to $90 billion. The main risk is rising depreciation from the company's AI infrastructure spending, more than $50 billion planned for the current quarter alone, which isn't yet reflected in today's earnings but will weigh on results going forward. Technically, the stock looks more interesting: it has reclaimed its 200-day moving average, and I'd consider a short-term trade on a sustained break above the $458.27 resistance level.

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