Microsoft reported fiscal fourth-quarter results that surpassed Wall Street estimates, driven by stronger-than-expected growth in its Azure cloud business and rising adoption of artificial intelligence products. The performance helped ease investor concerns about the company's heavy spending on AI infrastructure.
Shares of Microsoft rose approximately 3.5% in extended trading following the release, as investors responded positively to robust cloud performance and continued momentum in AI-related services. The stock had declined about 18% year-to-date prior to the earnings announcement.
Azure growth tops expectations as AI demand remains strong
Microsoft reported that Azure cloud-computing revenue increased 43% in the fiscal fourth quarter, outperforming analyst expectations of roughly 40%, according to Visible Alpha. The cloud business generated $39.3 billion in revenue during the quarter.
The company also disclosed that Azure's annual revenue surpassed $100 billion for the first time, highlighting continued enterprise demand for cloud infrastructure and AI services. Chief Executive Officer Satya Nadella said, "Azure revenue surpassed $100 billion for the first time, and Microsoft 365 Copilot reached over 30 million paid seats, reflecting the confidence customers are placing in us to power their AI transformation."
Microsoft 365 Copilot subscriptions grew to 30 million from 20 million in the previous quarter, exceeding analyst expectations of 26.9 million, according to Reuters calculations based on estimates from several brokerages. The company also reported a contracted cloud backlog of $678 billion at the end of the quarter, up from $627 billion in the prior quarter.
Revenue and earnings beat Wall Street forecasts
Microsoft posted quarterly revenue of $90 billion, an 18% increase from a year earlier, exceeding analyst estimates of $87.42 billion. Net income increased 31% to $35.8 billion during the quarter. Adjusted earnings came in at $4.81 per share, ahead of consensus expectations of $4.2 per share.
The results reinforced investor confidence that Microsoft's AI investments are translating into stronger financial performance, despite concerns over the industry's heavy spending on data centers. Microsoft remains among the companies leading the AI boom through its long-standing partnership with OpenAI, while also expanding its own AI capabilities by developing in-house models and incorporating technology from companies such as Anthropic into its offerings.
AI infrastructure spending remains elevated
Microsoft continued investing aggressively in AI infrastructure during the quarter. Capital expenditures rose more than 70% year over year to $41 billion, reflecting continued spending on data centers and high-performance computing infrastructure needed to support AI services. Although the figure was slightly below market expectations of $42.37 billion, it represented a significant increase from the $31.9 billion spent in the previous quarter.
The company has forecast approximately $190 billion in spending during the current calendar year as part of broader AI infrastructure investments across the technology industry. Microsoft has previously said cloud growth remains constrained by limited computing capacity, a situation it expects to continue through at least the end of 2026. The company has also been expanding capacity through partnerships beyond its own data center buildout, including a recent agreement with French AI startup Mistral.
For context on broader market trends, the Dow surged 546 points recently as strong earnings offset tech weakness, while Seagate also benefited from AI storage demand in its own earnings beat. Meanwhile, UBS reported a Q2 profit beat and announced a $3 billion buyback, highlighting varied performance across sectors.
Despite Wednesday's earnings beat, Microsoft shares remain down about 18% this year, reflecting ongoing market volatility and investor scrutiny of AI-related spending.
This article is for informational purposes only and does not constitute financial advice.
