Microsoft-led rebound lifts Wall Street as AI fears ease

Wall Street's major indexes surged Thursday after Microsoft delivered forecast-beating results that sent its shares up more than 15%, their biggest daily percentage gain in 18 years. The S&P 500 rose 1.7%, the Dow Jones Industrial Average gained 1.2% and the Nasdaq climbed 2.8% as investors rushed back into technology after a volatile stretch.

The session read as a market verdict that fears about AI overspending may have been overstated, with Microsoft as the proof point. The company’s fiscal Q3 2026 release showed revenue up $12.8 billion, or 18%, driven by Microsoft Cloud. Intelligent Cloud revenue increased on Azure strength, while Productivity and Business Processes rose on Microsoft 365 Commercial cloud. For traders who had spent days debating whether the AI buildout was becoming a costly burden, the numbers suggested that the spending was still feeding growth.

The scale of the reaction had already been visible in options markets, where Microsoft was set for a $190 billion swing in market value after earnings. Microsoft’s quarterly capital expenditures were $41 billion, and profit jumped 31.6% even as it kept increasing AI spending, a combination that helped ease worries that the bill for data centers and chips was outrunning the payoff. That balance, heavy investment matched with rising revenue, was enough to reset sentiment across a market that had been punishing AI-linked stocks only days earlier.

The rebound also spread beyond Microsoft. Chip stocks turned higher with the broader market, and long-term Treasury yields hovered near recent highs even as equities bounced. The Federal Reserve’s policy outlook remained part of the backdrop, but Microsoft’s results overpowered that caution for the day. By the close, the software giant had logged its best day in nearly two decades, a reminder that when a handful of megacap technology stocks dominate performance, one earnings report can still move Wall Street’s mood and market value in a single session.