Microsoft shares on track for best quarter in 28 years with 36% surge

Microsoft is closing in on its biggest quarterly share price gain in 28 years, buoyed by growing confidence in its AI capabilities.

Microsoft shares closed at $508.96 on Tuesday (local time), surging 36.4% for the third quarter. According to Dow Jones Market Data, that would mark the company's strongest quarterly gain since the first quarter of 1998, when the stock rose 38.5%.

The stock had plunged 23.5% in the first quarter of this year — its worst quarterly drop since the financial crisis — before staging a sharp reversal, climbing 41.8% over the past six months.

Ifu Li, an analyst at StoneX, told MarketWatch that the rally reflects a broader shift toward quality stocks, with investors increasingly viewing Microsoft as a stable and trustworthy AI platform. Investors are also focused on whether AI can translate into real revenue, and Microsoft answered that question with a strong earnings surprise in the June quarter.

Li said investor attention is shifting from "who has the best AI model" to "who has the infrastructure, databases and systems to make AI actually run."

MarketWatch noted that Copilot, the AI assistant Microsoft unveiled last week, represents a strong opportunity for the company to expand AI sales beyond its traditional software subscription model.