Microsoft (MS) has exceeded market expectations with strong earnings driven by growth in its cloud business. The company significantly increased its investments in artificial intelligence (AI) infrastructure, and the rapid growth of its core cloud service, Azure, has raised hopes that these large-scale AI investments are translating into actual revenue growth.
On July 29, Microsoft announced that its revenue for the fourth quarter of fiscal year 2026 (April to June) rose 18% year-over-year to $90 billion, surpassing market expectations of approximately $87.6 billion.
Operating income increased by 18% to $40.6 billion, while net income rose 31% to $35.8 billion. Earnings per share (EPS) stood at $4.81, and the adjusted EPS, excluding certain investment effects, was $4.74, exceeding the market forecast of $4.24.
The cloud business was the primary driver of these results. Total cloud revenue reached $59.3 billion, a 27% increase from the previous year. Notably, Azure and other cloud services saw a 43% surge, outpacing the market's anticipated growth rate of around 40%.
For the first time, Azure's annual revenue surpassed $100 billion. The paid accounts for Microsoft 365 Copilot, an enterprise AI service, exceeded 30 million, marking a more than 50% increase from 20 million in the previous quarter.
As demand for AI grows, investments in data centers and servers have also expanded significantly. Capital expenditures for the fourth quarter, including costs for equipment rentals, reached $41 billion, more than 70% higher than the previous year. Although this figure was a substantial increase from $31.9 billion in the prior quarter, it fell short of the market expectation of $42.37 billion.
Due to these large investments, the actual cash remaining with the company has decreased. The free cash flow, calculated by subtracting capital expenditures from cash generated from operations, was $19.6 billion, a 23% decline from the previous year. However, this was significantly above the market expectation of $13.44 billion.
Microsoft plans to invest approximately $190 billion this year in data centers and AI infrastructure. The company anticipates that the demand for AI services will continue to grow rapidly, leading to a persistent shortage of data centers and servers to meet this demand through the end of the year.
Satya Nadella, Microsoft’s CEO, stated, "Azure's annual revenue has surpassed $100 billion for the first time, and the number of paid accounts for Microsoft 365 Copilot has also exceeded 30 million."
Following the earnings announcement, Microsoft’s stock rose about 4% in after-hours trading.
* This article has been translated by AI.
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