Microsoft shares rose 7% in extended trading after fiscal fourth-quarter revenue of $90.01 billion beat analyst estimates and the company called for steady 2026 capital expenditures. Azure growth accelerated to 43%, and finance chief Amy Hood said she expects free cash flow to stay positive in fiscal 2027.
Microsoft shares moved 7% higher in extended trading on Wednesday after the software maker reported fiscal fourth-quarter revenue of $90.01 billion and called for steady 2026 capital expenditures. Analysts polled by LSEG had expected $87.62 billion in revenue and $4.24 in adjusted earnings per share, against the $4.74 adjusted Microsoft delivered.
Revenue grew about 18% year over year in the quarter, which ended on June 30. Net income reached $35.77 billion, or $4.81 per share, up from $27.23 billion, or $3.65 per share, in the same quarter a year ago. The company cited a $3.2 billion gain from its investment in AI lab Anthropic and lower-than-expected costs tied to its first voluntary retirement program, while its Xbox gaming business received an impairment charge.
The stock still trails the market this year. Microsoft shares have given up 19% so far in 2026, while the S&P 500 index has gained about 7%. Investors have squeezed longstanding software stocks this year, acting on fears of disruption from generative AI models.
Azure growth accelerates to 43%
Azure growth accelerated to 43%, or 43% at constant currency, compared with 40% in the prior quarter and the 40% analysts had expected. The Intelligent Cloud segment featuring Azure posted $39.31 billion in revenue, up 31.6% year over year. Microsoft said Azure revenue exceeded $100 billion for the first time in the 2026 fiscal year, up 41%, which leaves the business trailing Amazon Web Services while remaining larger than Google Cloud.
Amy Hood, Microsoft's finance chief, projected 45% Azure growth at constant currency for the fiscal first quarter, above StreetAccount's 41.4% consensus. Guidance calls for $89.85 billion to $90.95 billion in fiscal first-quarter revenue, which would be up 16%, against the $89.66 billion analysts surveyed by LSEG were looking for.
Capital spending lands at roughly $175 billion
Hood reiterated the plans for 2026 capital spending, and the company said it will lengthen the useful life of office and data center buildings to 25 years from 15. More future data center leases will change over to operating leases from finance leases, an adjustment that will lead to roughly $175 billion in capital expenditures. Microsoft had said earlier this year that it planned to spend $190 billion on capital expenditures this calendar year, and Business Insider reported the lower guidance figure reflects the accounting change rather than a smaller AI budget.
Business Insider called the decision to keep a lid on capex unusual, because most cloud giants have been steadily increasing their AI spending forecasts. Alphabet recently increased its capex projection by $15 billion. Meta, reporting on the same Wednesday, narrowed its own capex forecast range and raised the midpoint by $2.5 billion for the year.
Free cash flow drops 23%
Free cash flow fell 23% to $19.64 billion. Capital expenditures and finance leases for the quarter jumped 69% to $41 billion. According to CNBC, Hood pointed to "demand signals across our portfolio" in forecasting further growth in capital expenditures for the 2027 fiscal year, and she said she expects Microsoft to be free cash flow positive that year.
Meta drew the opposite reaction. InvestingLive noted that Meta reported the same night with free cash flow down 91% and a 12% hit to its stock.
Sources: CNBC, InvestingLive, Business Insider
Trading involves risk.
Risk Disclaimer
