Microsoft’s strongest stock-market performance since 2008 powered a broad rebound in major U.S. indexes, as investors embraced evidence that the software company’s extensive artificial-intelligence investments are producing faster cloud growth and higher profits. Microsoft shares climbed 15.5% on Thursday, helping the S&P 500 rise 1.7% and recover more than all of the previous session’s decline.

The Dow Jones Industrial Average gained 613.92 points, or 1.2%, to close at 52,208.06. The S&P 500 added 121.48 points to 7,437.63, while the technology-heavy Nasdaq Composite advanced 2.8%. The Russell 2000 index of smaller companies also rose 1.4%, although the market’s most influential technology and semiconductor companies accounted for much of the headline strength.

Microsoft became the session’s central driver after reporting $90 billion in revenue for its fiscal fourth quarter, an increase of 18% from the corresponding period a year earlier. Operating income rose 18% to $40.6 billion, while GAAP net income increased 31% to $35.8 billion. Diluted earnings per share reached $4.81, up 32%.

The company’s cloud performance provided the clearest evidence supporting the market’s renewed optimism. Revenue from Azure and other cloud services increased 43%, while Microsoft Cloud revenue rose 27% to $59.3 billion. Microsoft said Azure’s annual revenue surpassed $100 billion for the first time, and commercial remaining performance obligations — contracted revenue that has not yet been recognized — increased 84% to $678 billion.

Those figures suggested that corporate demand for cloud computing, AI infrastructure and software assistants remains strong despite concerns about the cost of deploying the technology. Microsoft also reported more than 30 million paid Microsoft 365 Copilot seats, offering investors a measurable indication that generative AI is moving beyond experimentation and into enterprise software budgets.

Equally important to the market reaction, Microsoft did not accompany its strong results with an unexpectedly large increase in projected AI investment. Investors have become increasingly selective about capital spending as technology companies commit tens of billions of dollars to data centers, processors and energy infrastructure. Companies that show revenue growth without sharply raising spending expectations have generally received a more favorable response.

That distinction was visible in Meta Platforms, whose shares fell 8%. The Facebook and Instagram parent reported revenue slightly above expectations but weaker profit and raised the lower end of its anticipated investment range. The contrasting performances reinforced a developing Wall Street standard: AI spending can support valuations when it produces visible operating leverage, but open-ended infrastructure commitments can pressure shares when the financial returns appear less certain.

Semiconductor stocks joined Microsoft’s rally, recovering part of their recent losses after a period of sharp volatility in AI-related shares. Micron Technology gained 18.4%, Lam Research rose 18% following stronger quarterly profit and revenue, and Advanced Micro Devices advanced 13%. The moves reflected renewed confidence that spending by large cloud providers will continue to support demand for memory, processors and chip-manufacturing equipment.

The rally did not eliminate concerns about elevated technology valuations or the possibility that AI infrastructure spending could eventually outpace profitable demand. Microsoft’s results instead provided a company-specific example of how a major platform can convert infrastructure investment into cloud growth, software subscriptions and an expanding backlog. That helped stabilize a technology sector that had suffered heavy selling earlier in the week.

The bond market presented a more cautious assessment of the economic outlook. The 10-year Treasury yield remained near 4.67%, while the 30-year yield increased to approximately 5.22% from 5.20% a day earlier. The 30-year yield had already risen sharply from 5.09%, signaling persistent investor concern about long-term inflation, federal borrowing requirements and the possibility that interest rates will remain high.

The Federal Reserve maintained its federal-funds target range at 3.5% to 3.75% following its July meeting. The decision passed by a 9-3 vote, with three officials favoring a quarter-percentage-point increase. The central bank said inflation remained elevated relative to its 2% goal, partly because supply shocks had increased prices in areas including energy.

Chair Kevin Warsh reiterated the Fed’s commitment to returning inflation to 2%, but investors were left uncertain about how quickly the central bank would tighten policy if inflation failed to improve. Higher Treasury yields can themselves restrain economic activity by raising financing costs, but relying on market rates to do that work also risks producing more volatile conditions for businesses, homeowners and investors.

Economic reports released Thursday reinforced the tension between slower growth and persistent inflation. The Bureau of Economic Analysis estimated that real gross domestic product expanded at a 1.5% annual rate during the second quarter, down from 2.1% in the first quarter. Consumer spending, investment and exports increased, while government spending declined and imports rose.

Inflation measures remained substantially above the Fed’s target. The personal consumption expenditures price index increased 3.7% in June from a year earlier, although it declined 0.1% from May. Excluding food and energy, the core PCE index rose 3.3% from a year earlier and 0.1% during the month. Personal consumption expenditures increased 0.3%, while personal income and disposable income each rose 0.2%.

The combination points to an economy that is still expanding but facing considerable price pressure. For equity investors, Microsoft’s results offered a powerful earnings-based reason to buy technology shares. For Treasury investors, the same trading session provided little evidence that inflation risks had disappeared or that borrowing costs would soon return to lower levels.

That divergence is likely to remain central to the market outlook. Strong AI-related earnings can continue lifting large technology companies and capitalization-weighted indexes, but high long-term yields create a competing force by reducing the present value of future profits and increasing the cost of financing new investments. Microsoft demonstrated that exceptional operating results can overcome that pressure for a day, even as the bond market continued to warn that the broader economic environment remains difficult.