Microsoft shares soared more than 14 per cent at the opening bell on Thursday after the technology giant exceeded quarterly earnings expectations, issued stronger-than-expected revenue guidance for the current quarter and maintained its long-term artificial intelligence (AI) investment plans.
The rally marked a sharp reversal for the stock, which had fallen 19.3 per cent since the start of the year amid investor concerns over mounting AI infrastructure spending and uncertainty about returns from billions of dollars invested in data centres and cloud computing.
The world’s fourth-largest company reported adjusted earnings of $4.74 per share on revenue of $90.01 billion for its fiscal fourth quarter, comfortably beating analysts’ expectations of $4.24 per share on revenue of $87.61 billion.
Microsoft also forecast first-quarter fiscal 2027 revenue of between $89.85 billion and $90.95 billion, exceeding market expectations and reinforcing confidence in continued demand for its cloud and AI services.
A key highlight of the results was the performance of Azure, Microsoft’s cloud computing platform, where revenue increased 43 per cent year-on-year, outperforming analysts’ forecasts of around 40 per cent growth. Overall Microsoft Cloud revenue rose 27 per cent to $59.3 billion.
Chief Executive Officer Satya Nadella said Azure generated more than $100 billion in annual revenue for the first time, while Microsoft 365 Copilot surpassed 30 million paid seats, reflecting growing enterprise adoption of the company’s AI products.
”We are advancing the frontier on the cost-to-outcome curve, ensuring every customer can turn tokens into business results,” Nadella said, adding that Microsoft continued to see strong customer demand for AI-powered services.
The company’s capital expenditure outlook, closely watched by investors, also helped lift sentiment. Microsoft maintained its calendar year 2026 investment expectations, effectively keeping spending plans broadly unchanged despite revising its reported forecast to reflect longer useful lives for data centres and office buildings.
During the quarter, capital expenditure rose 70 per cent from a year earlier to $41 billion, slightly below analysts’ estimates of $42.37 billion. Around two-thirds of the spending was directed towards short-lived assets, including central processing units (CPUs) and graphics processing units (GPUs), to meet growing cloud and AI demand.
Nadella revealed that Microsoft added 31 new data centres across five continents during the quarter, bringing the total number built this year to 88.
The results come against the backdrop of growing investor scrutiny over AI-related capital spending. Technology companies have collectively committed hundreds of billions of dollars to AI infrastructure, raising concerns that returns may take longer than expected to materialise.
Alphabet recently increased its capital expenditure forecast to as much as $205 billion as it accelerates investment in AI servers and data centres, while concerns over AI valuations have weighed heavily on semiconductor stocks in recent weeks.
However, Microsoft’s latest results suggested that its AI investments are increasingly translating into commercial success.
Barclays analysts said the earnings report provided sufficient evidence for investors to reconsider the stock, citing stronger Azure growth, improved Office performance and a capital expenditure outlook that avoided negative surprises.
”The company is delivering better Azure and finally better Office growth, while also not surprising negatively on its capex outlook and free cash flow targets,” the analysts said.
Jake Behan, Head of Capital Markets at Direxion, said the results demonstrated that Microsoft’s AI investments were beginning to generate tangible returns.
”After months of questions about the company’s infrastructure spending, the quarter showed that those investments are increasingly translating into revenue growth, backlog expansion and Copilot adoption,” he said.
He added that investors were now rewarding companies capable of monetising AI rather than simply investing heavily in the technology, noting that Microsoft had firmly established itself as one of the industry’s leading beneficiaries of the AI boom.
