Microsoft wins back Jim Cramer's support after a surprisingly good quarter

Jim Cramer has had a change of heart about Microsoft following Wednesday evening's earnings report. Microsoft 's stock soared more than 17% to nearly $458 per share Thursday after the cloud and software giant delivered a strong quarter of Azure cloud growth and said there are no plans to increase AI spending. That combination reignited Jim's enthusiasm for the company. "I had been a big believer at one point that Microsoft is a stock that I should sell for my Charitable Trust," Jim said on CNBC, the morning after the print. "Now, I regret that I even had those thoughts." For a while, Jim had been very disappointed with Microsoft as shares sank earlier this year for a number of reasons, including concerns over enterprise software being disrupted by artificial intelligence, a perception of a subpar AI assistant Copilot, and whether the company relied too much on OpenAI for cloud growth. The print Wednesday night eased each of those worries. Sales in the company's Productivity and Business Processes unit, which includes Office and LinkedIn, soared 18% for the quarter, and management's segment guidance beat estimates. The performance of Copilot was also a pleasant surprise, with the company saying it is now up to more than 30 million paid seats. Citi analysts recently went to bat for Copilot, which turned out to be a good call. Azure was "on fire," as Jim described it, with sales for the quarter up 43%. Strength in the pipeline came from a more diversified customer base, which included companies outside of frontier AI model developers like OpenAI. The company's cloud revenue outlook also exceeded forecasts. The biggest development of the night, and the reason for the stock surge, was Microsoft's decision to break ranks and hold its capital expenditure outlook for calendar year 2026 steady. It was in stark contrast to Meta Platforms , whose stock tumbled nearly 9% on Thursday after its capex guide hike the night before. Last week, Alphabet raised its spending outlook , and shares went lower. Our final hyperscaler, Amazon , reports earnings after the close. MSFT 1Y mountain Microsoft 1 year Despite Thursday's rally, Microsoft's stock is still down about 5.4% year to date and more than 15% from last October's closing high of around $542 per share. Jim does not think the Microsoft comeback story ends here. During Thursday's Morning Meeting , he said the stock has taken a leap from "most hated" to "most loved." In addition to all the positive news out Wednesday night alongside earnings, free cash flow was strong, demonstrating an ability to monetize its businesses. Jim is confident that Microsoft will hit our price target of $500 per share. "You gotta stay long. Do not touch it," he concluded, which was in keeping with our decision to reiterate our hold-equivalent 2 rating. It's not our style to chase huge one-session rallies like the one on Thursday, but seeing the battleground stock make a stand is great. (Jim Cramer's Charitable Trust is long MSFT, META, ANZN, GOOGL. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.