Microsoft Stock Surges 37.5 Percent in Best Quarter Since 1998

Microsoft Corp. shares surged 37.5 percent between July and September, marking the stock's strongest quarterly performance since 1998. This rally added US$1 trillion to the company's market capitalization, outpacing the Nasdaq 100 Index's 0.4 percent gain during the same period. The technology giant reported revenue of US$90 billion for the quarter ended June 30, an 18 percent increase from the previous year.

The company's cloud business drove much of this growth, with Microsoft Cloud revenue reaching US$59.3 billion, up 27 percent. Azure and other cloud services revenue increased 43 percent, while commercial remaining performance obligation rose 84 percent to US$678 billion. Diluted earnings per share came in at US$4.81, up 32 percent on a GAAP basis. Satya Nadella, chairman and CEO, highlighted that Azure revenue surpassed US$100 billion for the first time this year, and Microsoft 365 Copilot reached more than 30 million paid seats.

Shares jumped 16 percent the following session, the stock's best day since October 2008, adding US$450 billion in market value. Chad Morganlander, senior portfolio manager at Washington Crossing Advisors, noted that Microsoft has clarified how it will earn revenue from its capital spending and has described customer benefits more clearly. The company's additions to property and equipment reached US$115.9 billion in fiscal 2026, up from US$64.6 billion in fiscal 2025.

Of the four largest AI spenders, Microsoft is the only one that has not seen free cash flow turn negative on an annual basis. Morganlander told Bloomberg that Microsoft shows a route to profitability from AI without posting losses. Despite June being the stock's worst month since 2000, with investors questioning Microsoft's spending, 69 out of 72 analysts tracked by Bloomberg have buy ratings on the stock. The average price target implies a gain of about 11 percent over the coming 12 months.