Microsoft Azure tops $100 billion as Q4 revenue beats estimates

Microsoft (MSFT) reported fiscal fourth-quarter revenue of $90 billion, up 18%, as Azure crossed $100 billion in annual sales for the first time.

"Azure revenue surpassed $100 billion for the first time, and Microsoft 365 Copilot reached more than 30 million paid seats," Chief Executive Officer Satya Nadella said.

Metric	Actual	Consensus	Beat/Miss
Revenue	$90.0B	$87.6B	+2.7%
EPS (adj.)	$4.74	$4.24	+$0.50

Azure and other cloud services revenue climbed 43% in the quarter, lifting full-year Azure growth to 41% and total fiscal 2026 revenue to $331.8 billion, up 18%. Adjusted earnings of $4.74 per share included a $0.27 gain from discrete items, chiefly a $3.2 billion gain on Microsoft's Anthropic investment. Operating income rose 21% to more than $155 billion for the year, while Microsoft Cloud revenue, spanning Azure and Microsoft 365 Commercial, exceeded $214 billion, up 27%.

Shares jumped 15.51% on July 30, the largest one-day gain in market value in stock market history, and added 3.02% the next session to close at $464.72. The rally followed guidance for Azure growth of about 45% in constant currency for the September quarter, faster than the 43% just posted, as new datacenter capacity comes online. Microsoft added 31 datacenters in the quarter and 88 across fiscal 2026.

Commercial remaining performance obligation grew 84% to $678 billion, with the entire sequential increase coming from customers outside the large AI model companies. Microsoft 365 Copilot paid seats surpassed 30 million, with net additions more than doubling quarter over quarter, while GitHub Copilot reached 50 million users and grew revenue more than 60% quarter over quarter after a shift to usage-based billing in June.

Capital expenditures reached a record $41 billion in the quarter, and free cash flow fell about 23% to $19.6 billion. Chief Financial Officer Amy Hood guided capex to grow again in fiscal 2027, with the September quarter alone above $50 billion, while noting roughly two-thirds of capex now goes to short-lived assets like CPUs and GPUs that can be paced to demand.

Microsoft trades at about 23.7 times forward earnings, a premium to Oracle near 16 times, Salesforce near 13 times and Adobe under 10 times. Goldman Sachs raised its price target to $640 from $610, Wells Fargo moved to $650 and Morgan Stanley to $600, while Citi lifted its target to $600 from $570.

Azure continues to battle Amazon's AWS, Alphabet's Google Cloud and Oracle Cloud Infrastructure for enterprise AI workloads. Amazon retains the largest cloud footprint by revenue, Google is gaining ground through AI-native offerings and custom silicon, and Oracle is expanding fast in database migrations and large AI infrastructure deals.

The guidance raise points to accelerating AI demand. Investors will watch the fiscal first-quarter report, due after the close on Oct. 27, for Azure growth against the guided 45% and for free cash flow to show cloud revenue outpacing the capex bill.

This article is for informational purposes only and does not constitute investment advice.