![\"\"](\"https:\/\/www.europesays.com\/ai\/wp-content\/uploads\/2026\/07\/Microsoft-earnings-Q4-07.29.2026-W.jpg\")
<\/p>\nMicrosoft comfortably beat Wall Street estimates on Wednesday, reporting strong Azure cloud growth and better-than-expected profit for the fourth quarter of its 2026 fiscal year.<\/p>\n
Microsoft\u2019s revenue for the quarter, which ended on June 30, came at $90 billion, beating analysts\u2019 estimates by more than $2 billion. Quarterly revenue grew by 18% year-over-year.<\/p>\n
The company also reported quarterly profits of $35.8 billion, a 31% increase from last year, which was boosted by about $3.2 billion due to the company\u2019s investment in the artificial intelligence startup Anthropic.<\/p>\n
Analysts were skeptical of Microsoft, and other Big Tech companies, going into earnings season as they wait for signs that the tech industry\u2019s unprecedented spending on AI development will eventually pay off. Microsoft signaled its AI products were driving fresh revenue, as its Azure cloud division reported better growth than expected.<\/p>\n
The division\u2019s revenue grew by 43% year-over-year, the fastest rate since 2022.<\/p>\n
\u201cThis year, Azure revenue surpassed $100 billion for the first time, and Microsoft 365 Copilot reached over 30 million paid seats, reflecting the confidence customers are placing in us to power their AI transformation,\u201d Microsoft CEO Satya Nadella said in a news release on Wednesday.<\/p>\n
Microsoft profit jumps with cloud growth<\/p>\n
Microsoft\u2019s Azure cloud computing division passed $100 billion in revenue during the company\u2019s 2026 fiscal year, driving a 31% increase in quarterly profit for the final quarter, which ended on June 30.<\/p>\n
<\/p>\n
<\/p>\n
Those 30 million paid users of Copilot, Microsoft\u2019s AI assistant, are double what Microsoft had six months ago.<\/p>\n
Both Azure and Copilot are closely watched by investors as they look for returns on AI investments, which are also known as capital expenditures. <\/p>\n
In a call with investors after reporting the better-than-expected quarterly growth in Azure, Microsoft\u2019s Chief Financial Officer Amy Hood provided a bullish outlook for the current quarter, which ends on Sept. 30. Hood said the company expects Azure\u2019s revenue to grow by 45%, though gave the caveat that growth rates can fluctuate based on computer chip capacity and the company\u2019s contract backlog.<\/p>\n
But even as revenue grows, so will capital expenditures, as the tech industry shows no sign of slowing down its spending on data centers and high-tech computer chips. Hood said capital expenditures reached a record $41 billion during the fourth quarter and will be over $50 billion from July through September.<\/p>\n
Microsoft is shifting some of its future data center leases from finance leases to operating leases, a designation that moves the costs to operating costs, which will drop Microsoft\u2019s expected capital expenditures for the calendar year from roughly $190 billion to $175 billion. However, the company\u2019s overall expected spending will remain unchanged.<\/p>\n
The tech industry\u2019s spending is eating into the free cash flow of most companies, and Microsoft is no exception. While it hasn\u2019t had to resort to leveraging large amounts of debt to fuel its AI build out, the company\u2019s free cash flow was $19.6 billion in the fourth quarter, down 23% from a year prior.<\/p>\n
Outside of Microsoft\u2019s furious cloud growth, the company\u2019s hardware divisions were hammered during the fourth quarter. Both Windows devices and Xbox suffered year-over-year declines, with Xbox hardware revenue falling by 13%.<\/p>\n
Xbox\u2019s drop was partially chalked up to severance costs from widespread layoffs this month and stronger performance last year. The gaming and PC industries have also been affected by a components crisis, as rampant AI spending drives up the cost of memory and storage hardware.<\/p>\n
After raising Xbox prices last year, Microsoft will again enact a price hike on Aug. 1.<\/p>\n
Microsoft\u2019s share price rose by as much as 8% in extended trading.<\/p>\n
Microsoft Philanthropies underwrites some Seattle Times journalism projects.<\/p>\n