OpenAI reportedly wants to go public at a valuation of $1 trillion or more. And no shareholder has more riding on that number than Microsoft (NASDAQ: MSFT) — a company having the worst 2026 of any “Magnificent Seven” member.
The pairing is strange when you line it up. Microsoft shares are down about 19% this year and sit nearly 30% below their 52-week high. Yet the same company owns roughly 27% of what is arguably one of the most valuable private technology companies in the world — a stake that could soon carry a public price tag.
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So does the IPO math change the buy case for a beaten-down Microsoft? Let’s run it.
Image source: Getty Images.
The stake math
Start with what Microsoft actually owns. When OpenAI completed its restructuring into a public benefit corporation last October, Microsoft disclosed that its investment represented roughly 27% of the company on an as-converted diluted basis, valued at approximately $135 billion. The same agreement extended Microsoft’s rights to OpenAI’s technology through 2032 and included a commitment from OpenAI to purchase an additional $250 billion of Azure services.
Then came June. OpenAI confirmed it had filed confidential paperwork with the Securities and Exchange Commission for an initial public offering (IPO), the first formal step toward a listing. And according to reporting from The New York Times, the company is now leaning toward a 2027 debut rather than late 2026 — largely because CEO Sam Altman has reportedly refused to accept a valuation below $1 trillion.
Here’s the math that matters for Microsoft shareholders. If OpenAI lists at $1 trillion, a 27% stake would be worth about $270 billion — roughly double the value implied when the deal was struck, and equal to about 9% of Microsoft’s entire $2.9 trillion market capitalization.
Some caveats, however, belong next to that figure.
The IPO timing and price are rumored intentions, not commitments. OpenAI will likely keep raising capital, which can dilute the percentage over time — the 27% figure already reflects dilution from OpenAI’s recent funding rounds. And a listing wouldn’t hand Microsoft cash. It would hand it a visible, liquid price for something the market currently values with a shrug.
That last point is the opportunity. Buried inside 2026’s worst-performing mega cap sits an asset that could be worth nearly a tenth of the company’s market value, and an IPO would force investors to finally price it.
Meanwhile, the actual business
The bulk of the long-term investment case for Microsoft stock doesn’t rest on OpenAI, though. Instead, it rests on the underlying business. And the business has continued to perform well while its share price hasn’t.
In its fiscal third quarter (ended March 31, 2026), Microsoft’s revenue rose 18% year over year to $82.9 billion, earnings per share climbed 23% to $4.27, and Azure and other cloud services revenue grew 40%. For a business of Azure’s scale, that’s an extraordinary rate.
The stock’s problem is what that growth costs. Microsoft expects about $190 billion in capital expenditures in 2026, and management said that figure includes roughly $25 billion just from higher component prices, with memory chips caught in a global supply crunch. Investors have spent the year worrying that spending of that magnitude will weigh on margins for years before it pays off, and they have repriced the stock accordingly.
That repricing, however, is what makes the shares interesting now. Microsoft trades at about 23 times earnings and roughly 20 times forward earnings — a discount to the premium it commanded throughout most of the artificial intelligence (AI) boom, even as the company still compounds revenue at 18%.
So, where does that leave the stock?
I think it’s a buy. With Azure growing at a 40% year-over-year rate, even as the stock trades at just 20 times its forward earnings, it looks attractive even without considering its OpenAI investment. A potential OpenAI IPO is arguably just icing on the cake; a $1 trillion debut would put a public number on a stake the market has been ignoring.
Still, that $190 billion of spending has to earn its keep, and OpenAI’s net losses already flow through to Microsoft’s results (though the company’s own non-GAAP figures specifically strip that impact out). But at this price, with this growth, investors are arguably being compensated for the wait.
Should you buy stock in Microsoft right now?
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Daniel Sparks and his clinets have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft. The Motley Fool has a disclosure policy.
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