Microsoft Shares Surge 36.4% in Q3, on Track for Best Quarter Since 1998 on AI Optimism

Microsoft (MSFT) shares have climbed 36.4% quarter-to-date, putting the stock on pace for its strongest quarterly performance since Q1 1998, when it rose 38.5%, according to Dow Jones Market Data. The rally marks a sharp reversal from a 23.5% decline in Q1, the stock's worst quarter since the 2008-2009 financial crisis. Analysts attribute the rebound to improving confidence in Microsoft's AI monetization strategy, following a strong June-quarter earnings report. StoneX analyst Yi Fu Lee said investors seeking AI exposure now view Microsoft as "one of the highest-quality platforms in tech," benefiting from a flight to quality. Tigress Financial's Ivan Feinseth cited clearer evidence supporting the company's AI investment thesis. Lee noted market focus is shifting from "who has the best AI model" to "who controls the enterprise environment" — the infrastructure and systems AI runs on. Microsoft's platform can host models from OpenAI, Anthropic and others. The company last week launched a new Copilot AI assistant, expanding its AI revenue beyond traditional software subscriptions across Home, Code and Autopilot offerings.