During August 3’s episode of CNBC’s Mad Money, host Jim Cramer spotlighted Microsoft Corporation (NASDAQ:MSFT) as July’s eighth-best performer in the S&P 500. After lagging broader tech indices for much of the year, Microsoft posted a massive 24.6% monthly gain, driven by a post-earnings surge:
Eighth place, Microsoft, up 24.6%, with most of that gain coming after the company reported a blowout quarter last Wednesday night. Given how weak the stock had been for most of the year, it was a nice surprise. Their Azure cloud infrastructure business is on fire, and lots of people are even paying for Copilot. Plus, Microsoft held the line on capital spending, hence the stunning gains in the stock. It’s a big position for my Charitable Trust. Those members of the CNBC Investing Club know that. They also know that I had cooled on it… saying that I hope they do a good job, or we would have to re-evaluate owning the stock. Well, glad we held on to it because they did a great job.
Microsoft’s Comeback After June Skepticism
The July rally stood in stark contrast to the severe selling pressure Microsoft Corporation (NASDAQ:MSFT) faced just weeks earlier. On June 30, Cramer addressed the stock’s July selloff after the stock dropped over 17% in a single month, erasing more than $500 billion in market capitalization. He stated:
We need to go over what the heck happened to these losing stocks in the month of June, then we’ll review all the winners for the quarter. Some of these Mag Seven declines, they are just hideous. The stock of Microsoft, for example, shed over 17% of its value this month, losing over a half a trillion dollars in market cap. Even though it has a decent cloud business, that’s not enough to make up for its core software exposure. Wall Street has no use for the software right now. Put aside this false narrative. Software’s a real good business.
If Microsoft wants to reverse its fortunes, it needs to do something bold like acquiring OpenAI if that company can’t come public because of its severe losses. Microsoft has a stake in the company. It can make the trade happen. That would allow it to scrap Copilot and replace it with uber popular ChatGPT. Or it can break itself up into extremely lucrative parts. Yes, Azure, the cloud computing business, Microsoft business-to-business software, Microsoft’s consumer software, Microsoft cybersecurity, video games, LinkedIn, all best in field. Listen, after a 17% loss in a month, these guys would be crazy to keep doing what they’ve been doing.
As Cramer detailed above, July’s 24.6% rally provided relief for long-term investors. After months of underperformance tied to concerns over massive AI infrastructure investments and general tech sector rebalancing, Microsoft Corporation (NASDAQ:MSFT) delivered operational results that silenced skeptics and rewarded patient shareholders.
Microsoft Cloud Hits $59.3 Billion with $678 Billion RPO Backlog
Microsoft Corporation’s (NASDAQ:MSFT) reported an operational beat across major metrics in the fourth quarter. Q4 revenue rose 17.8% year-over-year to $90 billion, topping Wall Street expectations by $2.37 billion. Non-GAAP earnings per share reached $4.74 (excluding OpenAI investment impacts), outperforming estimates by $0.50. For the full fiscal year 2026, Microsoft reported $331.8 billion in total revenue, up 18%, and $155.2 billion in operating income, which was up 21%, with non-GAAP diluted EPS rising 22% to $17.95.
The catalyst behind the quarter’s acceleration was the Microsoft Cloud business, which generated $59.3 billion in revenue, a 27% year-over-year increase. Enterprise demand for Azure AI integration and the expansion of Microsoft 365 Copilot commercial adoption drove the commercial remaining performance obligation up 84% to $678 billion. This massive backlog of contracted enterprise business provides substantial visibility into contracted future revenue.
Active Managers Adjust Position While Bears Avoid Shorting MSFT
Elite money managers trimmed mega-cap technology exposure early in the year, a trend visible across peers like Amazon and Alphabet. According to 13F data tracked by Insider Monkey, hedge fund ownership in Microsoft Corporation (NASDAQ:MSFT) dropped from 312 funds in Q4 2025 to 282 funds in Q1 2026, with Q2 filings currently in progress. Fisher Asset Management held the most prominent stake in the company with 25.9 million shares. It is worth noting that Soroban Capital Partners also disclosed a call-option position referencing 60 million shares valued at over $22 billion.
Microsoft Corporation (NASDAQ:MSFT) short interest stands at just 1.24% of float. This negligible short float shows that while active managers adjusted position sizing in Q1, traders see little incentive in betting against Microsoft’s enterprise scale and cloud dominance.
While we acknowledge the risk and potential of MSFT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MSFT and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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