Microsoft has reported a stronger-than-expected final quarter of its fiscal year. Azure, in particular, grew faster than analysts had anticipated and, for the first time, achieved annual revenue of more than $100 billion. According to the company, demand for AI and cloud services continues to outpace available capacity.
Azure posted revenue growth of 43 percent in the fourth quarter compared to the same period a year earlier. This marks Microsoft’s highest growth rate since early 2022. Chief Financial Officer Amy Hood expects growth to accelerate further to about 45 percent in the current quarter. “Demand continues to outpace the capacity we can deliver,” she said during the earnings call.
According to Bloomberg, the strong growth underscores Microsoft’s success in converting demand for AI services into additional cloud revenue. Azure serves as the foundation for both Microsoft’s own AI services and the models from OpenAI and other customers. Microsoft Cloud’s total revenue for the quarter came in at $59.3 billion, a 27 percent increase compared to the same period a year earlier.
Capital expenditures remain high
Microsoft invested $41 billion in data centers and AI infrastructure last quarter, among other things. That represents a 70 percent increase compared to a year earlier, although the amount fell slightly short of analysts’ expectations.
Nevertheless, the company expects to spend less for the full year than previously forecast. Whereas capital expenditures were previously projected at approximately $190 billion, Microsoft now anticipates about $175 billion. However, this adjustment is primarily due to an accounting change. Microsoft is extending the depreciation period for new data centers and office buildings from 15 to 25 years, while also classifying more lease agreements as operating leases. According to Hood, this does not change the actual investment plans for 2026.
This clarification appears to have reassured investors. Microsoft’s stock rose about 9 percent in after-hours trading after coming under pressure earlier this year over the scale of its AI investments.
In addition, the so-called Commercial Remaining Performance Obligations (RPO), an indicator of revenue that has already been contracted but not yet realized, rose to $678 billion. According to Hood, that growth came primarily from customers outside the major AI model developers.
Copilot gains ground
Microsoft’s AI assistants are also gaining popularity. CEO Satya Nadella (photo) announced that more than 30 million users are now paying for Microsoft 365 Copilot. Three months ago, that number was still around 20 million.
SiliconANGLE also reports that GitHub Copilot has now surpassed 50 million users. According to Nadella, hundreds of large organizations are also opting for the E7 productivity bundles that include Copilot.
Microsoft closed the quarter with revenue of $90 billion, an 18% increase from a year earlier. Earnings per share came in at $4.81, also well above analysts’ expectations. Part of that earnings growth stemmed from the higher valuation of Microsoft’s stake in AI company Anthropic.
For the current quarter, Microsoft expects revenue to range between $89.85 billion and $90.95 billion. That forecast also exceeds analysts’ average expectations and contributed to the positive reaction from investors.