Microsoft shares surged 9% in extended trading on Wednesday (Thursday AEST) after the software giant reported stronger-than-expected fiscal fourth-quarter results and maintained its 2026 capital spending plans, citing continued demand across its portfolio.
The company reported adjusted earnings per share of US$4.74, beating expectations of $4.24, while revenue came in at $90.01 billion compared with forecasts of $87.62 billion.
Microsoft’s revenue increased about 18% year over year in the quarter ended 30 June, while net income rose to $35.77 billion, or $4.81 per share, from $27.23 billion, or $3.65 per share, a year earlier.
The company said results were boosted by a $3.2 billion gain from its investment in artificial intelligence firm Anthropic and lower-than-expected costs linked to its first voluntary retirement programme. Its Xbox gaming business, however, received an impairment charge.
Microsoft said commercial remaining performance obligations, which measure unearned and unrecognised revenue, increased 8% to US$678 billion from the previous quarter, driven by commitments from clients outside AI model developers.
Capital expenditure and finance leases reached US$41 billion during the quarter, up 69%.
Microsoft finance chief Amy Hood reiterated the company’s 2026 capital spending plans, while the company said it would extend the useful life of office and data centre buildings to 25 years from 15 years.
More future data centre leases will also shift from finance leases to operating leases, resulting in roughly $175 billion in capital expenditure.
Hood said capital spending would continue to grow in the 2027 fiscal year, noting, “We remain confident in the return on these investments given higher demand signals and increasing product usage as well as the efficiencies we’re already driving across the platform.”
Free cash flow fell 23% to $19.64 billion, although Hood said Microsoft expects to remain free cash flow positive in fiscal 2027.
Microsoft’s Intelligent Cloud segment, which includes Azure, reported revenue of $39.31 billion, up 31.6% year over year and above analyst expectations of $38.16 billion.
Azure growth accelerated to 43%, compared with 40% in the previous quarter. Microsoft said Azure revenue exceeded $100 billion for the first time in fiscal 2026, increasing 41%.
The company’s Xbox revenue declined 10%. Earlier this month, Xbox chief executive Asha Sharma announced job cuts and said four studios would spin out.
During the quarter, Microsoft introduced a cost-efficient AI coding model, appointed LinkedIn executive Dan Shapero to lead the business social network and lowered Xbox Game Pass subscription prices.
Microsoft maintains a market capitalisation of US$2.9 trillion.
