Microsoft said its Azure cloud business surpassed $100 billion in annual revenue in its recently ended fiscal year, cheering investors in the company even as the broader market plunged on worries over AI spending and U.S. inflation.<\/p>\n
\n
Cloud growth in Microsoft\u2019s fiscal fourth quarter increased 43% percent year over year, providing a boost to overall quarterly revenue of $90 billion, above analyst estimates of $87.7 billion.<\/p>\n
Azure, the core of Microsoft\u2019s cloud business, surpassed $100 billion in annual revenue for the first time ever this fiscal year, rising 41% over last year\u2019s $75 billion, CEO Satya Nadella said. The gain helps cement Microsoft\u2019s Azure as a leading cloud giant behind Amazon Web Services, and as one of the most prominent providers of the infrastructure undergirding the AI era.\u00a0<\/p>\n
Shares of Microsoft rose more than 8% in after-hours trading, following a broad market selloff in regular trading Wednesday after the U.S. Federal Reserve held interest rates steady. The Dow Jones industrial average plunged by more than 1,100 points on Wednesday, while the tech-laden Nasdaq 100 fell more than 2%. Tech stocks have taken a drubbing in recent days over fears that rising capital expenditures among big AI-focused tech firms won\u2019t translate into returns fast enough.<\/p>\n
Microsoft appears hopeful to counter that narrative with its quarterly and fiscal year-end results.\u00a0In a statement, Nadella cited customer demand for AI as driving the growth in Azure and helping Microsoft\u2019s 365 Copilot service reach over 30 million paid seats.<\/p>\n
The company\u2019s 2026 financial results show that revenue was $331.8 billion for the fiscal year, while net income was $133.7 billion, up 31% over last year. Earnings per share rose 32% to $17.95, although EPS was helped along by a $3.2 billion gain from Microsoft\u2019s investment in Anthropic and nearly $5 billion in gains from its investment in OpenAI during the year. However, the gains the $2.9 trillion tech giant saw were partially offset by severance expense and impairment charges in video game business Xbox.\u00a0\u00a0<\/p>\n
For the fourth quarter, revenue rose to $90 billion, up 18% year over year. Net income surged 31% to $35.8 billion. Diluted earnings per share reached $4.81, up 32%.<\/p>\n
Microsoft Cloud, which includes Azure and other cloud businesses, was the driver of much of the quarterly growth, which spun up $59.3 billion in the quarter, a 27% increase. The commercial remaining performance obligations\u2014a figure that shows signed customer agreements that haven\u2019t yet turned into revenue\u2014was $678 billion, up 84%.<\/p>\n
During the earnings call, Nadella said the recent security incident in which an autonomous OpenAI agent escaped its testing environment and hacked into AI startup Hugging Face is a prime example for the reasons why companies should not be dependent on a single AI model. The statement was notable given that Microsoft previously had an exclusive partnership with OpenAI. However, Microsoft now offers 11,000 models through its Azure platform, including those from OpenAI, Anthropic, and Mistral. Nadella said Microsoft has seen a fivefold increase in customers building with multiple providers.<\/p>\n
\u201cThe biggest thing that we should take away from that is you can\u2019t depend on any one model,\u201d Nadella said. \u201cYou will maybe need multiple models to even remediate some challenges that get caused by one model.\u201d<\/p>\n
Looking ahead, chief financial officer Amy Hood guided first quarter fiscal 2027 Azure growth to about 45%, indicating future acceleration. Hood said capital expenditures in Q1 will exceed $50 billion, but that figure is actually an understatement. <\/p>\n
Microsoft is extending the estimated \u201cuseful life\u201d of the buildings housing its data centers from 15 to 25 years, she explained during the call, an accounting change that reclassifies some future leases from capital expenditures to operating expenses.<\/p>\n
To be clear, the size of the investment won\u2019t change, but the reported capex number will drop. Hood said the same reclassification will actually function to \u201creduce\u201d the 2026 capex from $190 billion to $175 billion, but there was no change in actual spending. Under the previous accounting regime, the $50 billion guidance for Q1 capex would appear to be a steeper increase from Q4\u2019s $41 billion.<\/p>\n<\/div>\n
#Microsofts #cloud #hit #milestoneAzure #crosses #billion #annual #revenue<\/p>\n","protected":false},"excerpt":{"rendered":"
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<\/p>\n