For four quarters, Microsoft Corp has been punished for spending. On Wednesday night, it was rewarded, and the reward arrived not because the spending stopped, but because the company finally showed investors what it is buying.
Azure grew 43% in the fiscal fourth quarter, accelerating from the three months earlier and clearing a consensus that sat near 40%. And, annualised Azure revenue passed $100bn for the first time, a scale that leaves the business behind Amazon Web Services but comfortably ahead of Google Cloud.
Group revenue of $90.01bn rose 18% and beat the $87.62bn market consensus; adjusted earnings of $4.74 a share cleared the $4.24 expected.
Shares climbed more than 8% in extended trading to around $423.
Microsoft's stock had endured a 19% retreat in 2026 to date, prior to Wednesday, whilst the S&P 500 gained about 7%. The Windows owner saw the weakest performance across the Magnificent Seven, because the market had concluded the AI capital cycle was a transfer of value from shareholders to construction firms.
The third quarter argues otherwise. Commercial remaining performance obligations reached $678bn, up 8% sequentially and 84% year on year, and Microsoft made a point of noting that the entire $51bn sequential increase came from customers other than the large AI model developers.
Strip out ChatGPT-owner OpenAI, and the backlog still grew 25%. Given that around 45% of a then-$625bn book was tied to OpenAI as of January, that disclosure was aimed squarely at the bears.
Microsoft 365 Copilot, meanwhile, passed 30 million paid seats from more than 20 million in April, beating market analyst forecasts that expected to see 26.9 million.
Nadella added that GitHub Copilot now has 50mn users.
The sceptic's volley still holds, however, pointing out that 30 million is still less than 7% of the roughly 450 million commercial Microsoft 365 seats. In other ways, adoption and conversion metrics are not impressive.
Whilst the bullish return is just as simple, in the past quarter the number just grew by half.
Microsoft's AI bill, meanwhile, is real and getting larger. Albeit, the OG Big Tech firm's financial engineering also showed they can compete with the software teams.
Wednesday's statement showed capital expenditure and finance leases hit a record $41bn, up 69%.
Free cash flow fell 23% to $19.64bn, though that was still $6bn ahead of what analysts had pencilled in.
Yet Amy Hood, Microsoft CFO, performed the quarter's most consequential piece of financial engineering: the useful life of office and data centre buildings was extended to 25 years from 15, and more future leases will be classified as operating rather than finance leases.
Spending plans are unchanged, the company insists; reported calendar 2026 capex falls to roughly $175bn from a prior $190bn. Q1 guidance of $50bn undershot the $56.02bn consensus for the same reason.
Investors can read that two ways. Either it is sensible alignment of accounting with the genuine economic life of a data centre, or it is the sound of a capex line being smoothed as the market increasingly scrutinised it. A securities filing disclosing $329.1bn of leases not yet commenced, starting between FY2027 and FY2033, with terms of one to 20 years, suggests the underlying commitment is anything but smooth.
Microsoft's guidance carried a similar shape, with Q1 FY2027 revenue pitched at $89.85bn to $90.95bn, versus forecasts $89.66bn expected, and Azure growth of 45% at constant currency versus roughly 41% consensus.
Hood said she expects Microsoft to remain free-cash-flow positive through FY2027 while capex grows further, citing demand signals across the portfolio.
Capacity constraints, the company has said, persist at least to the end of 2026.
Elsewhere, the legacy businesses did what legacy businesses do. Windows OEM and Devices revenue fell 7%, with Gartner estimating PC shipments down 4.2%. Xbox content and services fell 10% and hardware 13%, alongside an unspecified asset writedown bundled into a net $500mn operating income hit.
Net income of $35.77bn, up 31%, was flattered by a $3.2bn gain on Microsoft's stake in Anthropic, whose models the company is now adding to its own products as it reduces its reliance on OpenAI.
