Microsoft (MSFT) Stock Posts Best Quarter Since 1998 as Wells Fargo Lifts Target

TLDR

• Microsoft stock gained 37.5% in the third quarter, its best quarter since 1998, adding $1 trillion to its market cap.
• Wells Fargo added MSFT to its Tactical Ideas list and raised its price target to $725 from $700.
• The rally followed a July earnings report that showed Azure cloud growth at its fastest pace in four years.
• Microsoft is restructuring into two segments, Agents and Infra, and Devices and Consumer, starting with fiscal Q1 2027 results.
• Of 72 analysts tracked by Bloomberg, all but three rate the stock a buy, and none recommend selling.

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Microsoft stock is having a moment. The company just posted its best quarterly performance since 1998, with shares up 37.5% over the three months. That move added roughly $1 trillion to its market cap.

Microsoft Corporation, MSFT

Wells Fargo analyst Michael Turrin added Microsoft to the firm’s Tactical Ideas list for the fourth quarter. He also raised his price target on the stock to $725 from $700.

Turrin pointed to a handful of catalysts driving his bullish view. Chief among them is Microsoft’s AI position “up and down the stack,” along with its upcoming Ignite conference in November.

He kept his Overweight rating in place. “Remain constructive into year-end, especially with shares at about 25x P/E,” he wrote in a note to clients.

A big chunk of the quarterly surge came after Microsoft’s late-July earnings report. That report showed cloud growth at its fastest pace in four years, fueled by AI demand.

The stock jumped 16% in a single day on that news. That was Microsoft’s strongest one-day move in nearly two decades, going back to October 2008, and it added $450 billion in market value on its own.

A Sharp Reversal From June

The rally is notable because of how different June looked. Just a few months earlier, Microsoft logged its weakest month in roughly 25 years as investors grew nervous about AI spending.

Chad Morganlander of Washington Crossing Advisors told Bloomberg that the company has cleaned up its messaging since then. He said Microsoft is showing “a clear path to profitability with AI” without going into the red.

Among the big AI spenders, that distinction matters. Alphabet, Amazon, and Meta have all seen free cash flow turn negative on an annual basis. Microsoft has not.

JoAnne Feeney of Advisors Capital Management offered a simpler read on the rally. She told Bloomberg that investors had misjudged the company’s potential, and much of the recent gain is just the market correcting that mistake.

Wall Street Is Mostly On Board

Analyst sentiment has swung firmly bullish. Of the 72 analysts Bloomberg tracks on Microsoft, all but three rate it a buy. Not one recommends selling.

Stifel’s Brad Reback upgraded the stock to buy last week. He wrote that Microsoft had “clearly turned the corner.”

Looking ahead, Turrin flagged Microsoft’s planned segment changes as another reason for optimism. The company will shift from three reporting segments to two starting with its fiscal first-quarter 2027 results in October.

The new structure separates Agents and Infra from Devices and Consumer. It will also give investors a cleaner look at Azure, since Microsoft will report Azure revenue on a dollar basis and strip out non-consumption elements.

Turrin called that change a source of “potential upside” for how the market values Azure going forward.

He also expects Microsoft’s Ignite conference, set for mid-November, to be bigger than usual. He’s anticipating more product announcements and fresh detail on the company’s first-party model strategy and custom silicon plans.

Despite the quarter’s gains, Microsoft’s year-to-date return sits at just 6.1%. That trails the Nasdaq 100’s 20% advance over the same stretch.