To The Moon

Microsoft released its fiscal fourth quarter and full-year results for the 2026 fiscal year on July 29. The report shows that driven by strong demand for cloud services and artificial intelligence, Microsoft reported fourth-quarter revenue of $900.1 billion, up 18% year-over-year, with net profit reaching $35.77 billion, marking a substantial increase. All key metrics surpassed market expectations. Fueled by the positive earnings report, Microsoft shares surged 8% in after-hours trading.

According to the financial data, in the fourth quarter ending June 30, Microsoft earnings per share rose to $4.81, up from $3.65 in the same period last year. The significant quarterly growth was primarily attributed to a $3.2 billion gain from an investment in AI lab Anthropic, as well as cost savings from a voluntary retirement plan. As Microsoft's core business engine, the Intelligent Cloud division, which includes Azure, reported fourth-quarter revenue of $393.1 billion, a 31.6% increase year-over-year. Within this, Azure cloud revenue grew 43% year-over-year, and for the full 2026 fiscal year, Azure's annual revenue crossed the $100 billion mark for the first time.

Microsoft Chief Financial Officer Amy Hood noted that given strong market demand signals, Azure's growth rate is expected to accelerate further to 45% in the next fiscal quarter. In terms of AI product deployment and commercialization, the number of paid subscribers for Microsoft 365 Copilot has surpassed 30 million, a significant increase from 20 million in April, while GitHub Copilot user numbers have reached 50 million. Microsoft CEO Satya Nadella stated that a large number of enterprise customers are rapidly accelerating their purchases of the company's high-end software service suites, and the company is continuously balancing computing resource allocation with technology application.

Regarding infrastructure investment and financial position, Microsoft reported capital expenditures and finance lease costs of $41 billion in the fourth quarter, up 69% year-over-year. The cumulative backlog of commercial orders increased 8% sequentially to $678 billion, driven primarily by a broad base of enterprise customers beyond generative AI research institutions. Hood reiterated the capital expenditure plan for the 2026 calendar year and announced an extension of the useful life assessment for office buildings and data center facilities from 15 to 25 years. Due to accounting classification adjustments, the estimated total capital expenditure and finance lease costs for 2026 are approximately $175 billion. Hood emphasized that driven by strong demand signals, capital expenditures will continue to grow in the 2027 fiscal year, and free cash flow will remain positive for the full year.

Performance across other business segments varied. The Productivity and Business Processes division, which includes Office software, reported fourth-quarter revenue of $378.5 billion, up 14.3% year-over-year. The More Personal Computing division posted quarterly revenue of $128.5 billion, down 4.4% year-over-year. Within this, Windows licensing and device sales fell 7%, while Xbox gaming revenue declined 10%. To address challenges in the gaming business, Microsoft implemented restructuring measures in the quarter, including layoffs within the Xbox division and the divestiture of some studios.