MSFT Analysis: The Most Under-Owned Megacap — Why Microsoft's 28% Pullback From Highs May Be the AI Era's Best Risk-Reward Setup
Microsoft Corporation (NASDAQ: MSFT) trades at $401.65 as of February 18, 2026 — a striking 28% below its 52-week high of $555.45 and well under both its 50-day moving average of $460.94 and 200-day average of $487.38. For a company generating over $305 billion in trailing twelve-month revenue and posting consistent double-digit growth, the disconnect between fundamentals and price action is notable. Morgan Stanley recently called Microsoft "the most under-owned megacap" on Wall Street, a rare label for a company with a $2.98 trillion market capitalization. The pullback has been driven by a broader tech sector correction fueled by AI disruption fears and investor concerns about the staggering capital expenditure required to build out generative AI infrastructure. Microsoft pledged $50 billion for Global South AI expansion alone, on top of tens of billions already committed to Azure data centers. Yet the most recent quarter — fiscal Q2 2026 ending December 2025 — delivered $81.3 billion in revenue, a 16% year-over-year increase, with diluted EPS of $5.16 and operating margins expanding to 47.1%. These are not the numbers of a company in crisis. The central question for investors is whether Microsoft's massive AI capital cycle will generate returns commensurate with the investment, or whether rising depreciation and capex will structurally compress free cash flow. With the stock trading at 25x trailing earnings — its cheapest valuation in over two years — the market appears to be pricing in meaningful risk. This analysis examines whether that risk is adequately rewarded.