Microsoft has shown impressive growth in 2025, adding $830 billion in market cap. Concerns over valuation may cause a pause in the stock’s rise. Despite this, Microsoft remains a long-term buy due to its consistent compounding growth over the last decade, driven by cloud, AI, and gaming segments.

Microsoft’s revenue and net income have seen significant growth over the past decade, with net profit margins also increasing. The company’s revenue has tripled, and net income has grown sixfold, showcasing its ability to generate high-margin profits. Microsoft’s success has led to a steep rise in its stock price.

Microsoft’s stock price has surged due to strong revenue growth, pushing its valuation higher. The company’s P/E ratio is close to 40, above its 10-year median. However, Microsoft has the potential to grow into its valuation over time, with continued revenue and earnings growth. Long-term investors may find value in the stock’s potential.

The market is willing to pay a premium for Microsoft due to its consistent earnings growth. Investors must decide if the high valuation is justified by the company’s performance. Microsoft’s success in cloud computing, AI, and other segments may support its high price, but caution is advised for those concerned about AI adoption slowing down.

Considerations must be made before investing in Microsoft amid its high valuation. The Motley Fool’s Stock Advisor team has identified 10 stocks for investors to buy, with Microsoft not making the cut. Investors should weigh the potential returns of other stocks before deciding to invest in Microsoft. Long-term investment and conviction in the company’s growth are key factors to consider.

Read more at Nasdaq: Microsoft Stock Is Getting Expensive. Should Investors Be Worried or Buy Anyway?