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Microsoft’s AI-Driven Rally Extends After Its Strongest Quarter Since 1998

October 1, 2026 at 08:20 EDT

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Microsoft’s stock has turned sharply higher after a quarter that convinced more investors its AI spending is translating into cloud growth, Copilot adoption and durable earnings. Shares rose 37.5% from July through September, their strongest quarterly performance since 1998, adding about $1 trillion in market value while the Nasdaq 100 gained just 0.4% over the same period.

Oct. 1, 2026 · Microsoft

AI growth powers a stock reversal

Microsoft’s July-to-September rally turned a disputed AI spending story into a growth-and-cash-flow story, led by Azure, Copilot and cloud demand.

37.5%

Microsoft share gain from July through September

43%

Azure and other cloud services revenue growth

30M+

Paid Microsoft 365 Copilot seats

$41B

June-quarter capital expenditures

Quarterly rally outpaced the index

The columns use the same percentage scale: Microsoft’s gain was about 94 times the Nasdaq 100’s increase.

37.5%

Microsoft

0.4%

Nasdaq 100

What investors liked

Azure passed $100 billion in annual revenue, Copilot exceeded 30 million paid seats, and free cash flow stayed positive despite heavy AI infrastructure spending.

What remains contested

Adoption depth, Copilot capabilities, GPU replacement cycles and more than $50 billion of expected September-quarter capex keep the execution bar high.

The AI payoff test

AI infrastructure spend→Azure capacity→Copilot adoption→Revenue and cash flow

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