Microsoft Shares Soar 7% After Q3 Earnings Beat

Microsoft (MSFT) shares rose to their highest level since July 2024 today, with an intraday gain of 0.40%.

Over the past five years, the strategy of buying MSFT shares after they reached a recent high and holding for one week yielded strong results. The strategy achieved a 64.86% return, surpassing the benchmark return of 49.45% by 15.42%. Although the strategy had a maximum drawdown of -17.75% and a Sharpe ratio of 1.02, indicating some risk and moderate returns, the compound annual growth rate (CAGR) was 23.41%, reflecting the strategy's overall effectiveness in driving gains over the period.

Analysts have set a price target of $540 for Microsoft, driven by expectations of a $24 billion revenue boom from AI. This projection highlights significant investor optimism about Microsoft's AI business potential.

Microsoft's leadership in AI and cloud computing has been a key driver of its recent stock performance. The company has unveiled new AI-focused products and collaborations with OpenAI, Nvidia, and xAI, enhancing its Azure platform's capabilities for enterprise clients. These partnerships position Microsoft as a leader in the AI race.

Microsoft's fiscal third quarter of 2025 reported significant revenue growth, with a 13% year-over-year increase, reaching $61.9 billion. The Intelligent Cloud segment surged by 21%, driven by Azure's 33% year-over-year growth. Such robust financial performance has fueled positive market sentiment and stock price increases.

Microsoft beat Q3 2025 earnings expectations, reporting $61.9 billion in sales versus estimates of $60.8 billion, and EPS of $2.94 versus $2.82. This earnings beat contributed to a 7% after-hours stock surge and positive investor sentiment.

Despite strong performance, Microsoft faces challenges such as rising U.S. Treasury yields and trade policy uncertainties, which could pressure tech stocks. Heavy capex spending for AI and cloud growth has raised concerns about short-term profitability, with operating margins slightly contracting.