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Microsoft's Fourth-Quarter Results Beat Estimates as Azure Revenue Rallies 43%

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Microsoft's Fourth-Quarter Results Beat Estimates as Azure Revenue Rallies 43%

Microsoft's (MSFT) fiscal fourth-quarter results topped Wall Street's expectations, driven by a revenue surge in cloud computing platform Azure.

For the three months ended June 30, adjusted earnings per share increased to $4.74 from $3.86, higher than the consensus on FactSet for $4.24. Revenue rose 18% to $90.01 billion, exceeding the Street's $87.62 billion view.

The intelligent cloud segment's revenue soared 32% to $39.31 billion, buoyed by 43% growth in Azure and other cloud services, Microsoft said. Analysts expected a 40% year-over-year advance in Azure sales.

Sales for the productivity and business processes segment grew 14% to $37.85 billion in the fourth quarter, driven by gains in 365 commercial and consumer cloud businesses as well as LinkedIn.

"This year, 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 (artificial intelligence) transformation," Chief Executive Satya Nadella said in a statement.

Shares of Microsoft were up 3.2% in after-hours trading, but had fallen 19% this year through Wednesday close.

Morgan Stanley sees Azure and Copilot as key catalysts for Microsoft's stock. Both platforms are "set to inflect," but the market is yet to fully price in the timing and magnitude of that inflection, the brokerage said in a note last week.

"Channel partners sounded positive on (calendar second-quarter) Azure results and the forward outlook," Morgan Stanley analysts wrote. "Our latest partner conversations continue to point to durable demand across Microsoft's commercial portfolio, with Azure, Microsoft 365, security and broader AI workloads remaining the primary growth drivers."

Revenue for Microsoft's more personal computing unit fell 4% annually in the fourth quarter, driven by declines in Xbox and Windows.

Microsoft said in April that it expected capital expenditures of about $190 billion for the 2026 calendar year.

"We believe consensus (fiscal 2027) capex estimates remain conservative relative to Microsoft's long-term AI infrastructure buildout and could move higher (mostly in the second half of fiscal 2027)," Morgan Stanley said.

Alphabet's (GOOG, GOOGL) second-quarter capex doubled year over year at $44.92 billion. The technology giant raised its 2026 capex outlook to between $195 billion and $205 billion from its previous range of $180 billion to $190 billion.

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