To The Moon

Microsoft Corporation released its financial results for the fourth quarter and full fiscal year 2026 on Monday, July 29, in the United States. Driven by strong demand for cloud services and the accelerating commercialization of artificial intelligence, the company reported quarterly revenue of $90 billion, an 18% year-over-year increase, while net profit surged 31% to $35.8 billion, with all key financial metrics exceeding market forecasts.

The earnings data indicates that the cloud business has become the core growth engine for Microsoft. During the fourth quarter, Microsoft's Azure cloud revenue grew by 43% year-over-year, pushing the full fiscal year 2026 Azure annual revenue past the $100 billion mark for the first time. Meanwhile, the paid user base for the AI assistant Copilot, embedded within the Office suite, climbed from over 20 million in the previous quarter to more than 30 million.

Microsoft CEO Satya Nadella noted that the breakthrough growth in the cloud business reflects global customers' trust in the company's ability to help them achieve AI transformation. Additionally, Microsoft's commercial unfulfilled order backlog rose 8% quarter-over-quarter to $678 billion, with the $51 billion in new orders during the quarter all coming from the broad enterprise market outside of frontier model research institutions, indicating that AI applications are accelerating their deployment across the broader real economy.

In terms of computing power and infrastructure, Microsoft continues to ramp up capital investment. Capital expenditures, including those for data centers, reached $41 billion in the fourth quarter, a substantial 69% year-over-year increase, bringing the total for fiscal year 2026 to $145.3 billion. Nadella stated that because market demand for cloud services consistently exceeds current capacity, Microsoft added 31 new data centers in the quarter, bringing the total for the full fiscal year to 88.

Microsoft CFO Amy Hood emphasized that the company expects capital expenditures for the 2026 calendar year to reach approximately $175 billion, with spending in the current fiscal quarter exceeding $50 billion. In contrast to some recent tech giants whose high capital expenditures have sparked market concerns about return on investment, Microsoft has alleviated investor anxiety thanks to its clear path to monetizing AI.

Buoyed by the positive earnings results, Microsoft's stock price surged more than 7% in after-hours trading. To concentrate resources on strategic core areas, Microsoft also implemented a structural reorganization of its traditional and non-core businesses. During the quarter, the personal computing business, which includes hardware and gaming, reported revenue of $12.9 billion, a 4% decline year-over-year. Within this, Xbox gaming revenue fell by 10%. In July, Microsoft laid off approximately 20% of its Xbox division staff, cutting roughly 4,800 positions, and divested or restructured several game studios.