Microsoft (MSFT) reported its fiscal fourth quarter earnings on Wednesday, beating analysts’ expectations on the top and bottom lines on the strength of its cloud revenue.
Microsoft stock climbed more than 6% on the news.
“Cloud and AI is the driving force of business transformation across every industry and sector,” Microsoft CEO Satya Nadella said in a statement.
“We’re innovating across the tech stack to help customers adapt and grow in this new era, and this year, Azure surpassed $75 billion in revenue, up 34%, driven by growth across all workloads.”
For the quarter, Microsoft saw adjusted earnings per share (EPS) of $3.65 on revenue of $76.4 billion. Wall Street was anticipating adjusted EPS of $3.37 and revenue of $73.89 billion, according to Bloomberg analyst consensus estimates. The company saw adjusted EPS of $2.95 and revenue of $64.72 billion in the same period last year.
Intelligent Cloud segment revenue, which includes Microsoft’s Azure business, topped out at $29.8 billion. Analysts were looking for $29.09 billion. Still, the company says demand continues to outstrip capacity.
The Windows maker’s earnings come a week after Google (GOOG, GOOGL) posted better-than-anticipated second quarter results on the strength of its cloud revenue growth, sending shares higher. The company also said it is pouring an additional $10 billion into its AI build-out, bringing the year’s total from $75 billion to $85 billion.
But investors were unperturbed by the increase and instead focused on CEO Sundar Pichai’s commentary indicating that Search volume grew by double digits in the quarter.
Despite Microsoft’s solid growth, Wedbush analyst Dan Ives wrote in a recent investor note that the company’s AI investments will truly take off in fiscal 2026.
“While AI use cases are building markedly in FY25, [it’s] clear FY26 for Microsoft remains the true inflection year of AI growth as CIO lines build for deployments behind the velvet ropes in Redmond,” Ives wrote.
BofA Global Research’s Brad Sills, meanwhile, said that Microsoft’s AI-powered Copilot software could serve as its next growth catalyst.
Microsoft is an AI leader thanks to its early investments in ChatGPT creator OpenAI (OPAI.PVT). But the companies are at odds over OpenAI’s plans to transform its for-profit arm into a public benefit corporation and how much equity Microsoft will get in the new business.
Without Microsoft getting on board, OpenAI could lose out on $20 billion in investments, hurting its future growth prospects.
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