Microsoft's fiscal fourth-quarter results showed Azure revenue up 43% year over year and total revenue up 18% to $90 billion, both ahead of analyst estimates. The stock jumped on the report even though shares remain down for the year. Management guided for continued growth next quarter despite expected pressure on the PC business.
Microsoft shares climbed 3.02% to $464.72 after the company's fiscal fourth-quarter earnings, driven by its cloud computing segment and growing adoption of Copilot. Even so, the stock is still trading down year-to-date and off more than 10% over the past year.
Azure keeps outrunning capacity
Azure revenue soared 43% year over year. That marked the 12th straight quarter in which Azure revenue rose by 30% or more, and it surpassed $100 billion for the fiscal year. Demand continues to outstrip capacity, and Azure revenue is projected to accelerate to 45% constant-currency growth in the first quarter.
Bookings rose 10%, and 18% when excluding OpenAI. Remaining performance obligations, which include future Azure commitments, surged 84% year over year to $678 billion, with about 30% of that backlog expected to convert to revenue over the next 12 months. Notably, the company said all of the sequential growth it saw came from non-AI model companies.
Total revenue for the quarter rose 18% year over year to $90 billion. Adjusted earnings per share climbed 23% to $4.74. Both figures topped the analyst consensus of $87.62 billion in revenue and $4.24 in adjusted EPS, as compiled by LSEG.
Copilot and 365 broaden the base
Overall intelligent cloud revenue, which includes Azure and GitHub, climbed 32% year over year to $39.3 billion. Microsoft introduced a usage-based pricing model for GitHub Copilot during the quarter, which helped drive a 60% sequential increase in GitHub Copilot revenue and seat expansion.
Productivity and business processes revenue, home to Microsoft 365 and LinkedIn, climbed 14% year over year to $37.8 billion, led by a 24% jump in Microsoft 365 Consumer cloud revenue after an earlier price increase. Paid Microsoft 365 Copilot seats reached 30 million, with net adds doubling quarter over quarter.
Windows and Xbox drag on results
Not every segment gained. Revenue in Microsoft's more personal computing segment, home to Windows and Xbox, decreased 4% year over year to $12.9 billion. Its search and news advertising business saw revenue rise 10%.
Windows OEM and device revenue fell 7%, and Xbox revenue dropped 10%. Windows demand is being hurt by high component costs, a pressure the company expects to continue.
Outlook holds despite PC pressure
Management projects fiscal 2027 first-quarter revenue between $89.85 billion and $90.95 billion, representing 16% growth at the midpoint and above the $89.66 billion analysts expected, despite the company expecting significant pressure in the PC market.
With a forward price-to-earnings ratio below 23.5 based on fiscal 2027 analyst estimates, Motley Fool analyst Geoffrey Seiler said Microsoft still looks attractively valued even after its post-earnings surge, adding that with sentiment starting to shift, he sees solid upside ahead over the coming years.
Source: Motley Fool
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