Microsoft shares jumped 18% in a week after fiscal fourth-quarter results showed Azure's annual revenue topped $100 billion for the first time. Quarterly revenue rose 18% year over year to $90 billion and net income soared 31%, pushing the stock back into positive territory for 2026.
Microsoft shares climbed 18% in a week after the company's fiscal fourth-quarter earnings report, a sharp reversal for a stock that had spent most of 2026 grinding lower. The move erased the year's losses, leaving Microsoft, a stock worth over $3 trillion, positive for 2026.
Azure crosses $100 billion in annual revenue
Investors went into the earnings report focused on Microsoft's AI progress, and the numbers delivered. Quarterly revenue grew 18% year over year to $90 billion, while net income soared 31% versus the prior year.
Azure drove much of that growth. The cloud unit expanded 43% and topped $100 billion in annual revenue for the first time, according to the report. CEO Satya Nadella noted that Microsoft 365 Copilot has surpassed 30 million paid seats, and he said AI demand continues to outpace supply despite the company's ongoing investment in data centers and other infrastructure.
Valuation resets after the rally
Microsoft's heavy AI spending had weighed on the stock for months, as investors questioned whether the outlays would generate an adequate return. Nadella has since repositioned the company as a more cost-effective AI provider, leaning harder into its own silicon and frontier models, a shift that appears to be resonating with customers as concerns grow over the cost of running some cutting-edge models at scale.
Before the earnings report, Microsoft traded at roughly 19 times forward earnings estimates, a modest multiple for one of the world's most prominent technology companies. The rally has since pushed the forward price-to-earnings ratio to 25. Analysts still expect Microsoft to grow earnings by an average of 15% to 16% annually over the next three to five years, estimates that look more credible after net income jumped 31% in the latest quarter.
Source: Motley Fool
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