Microsoft has projected continued strong growth driven by its artificial intelligence (AI) investments, delivering better-than-expected revenue and cloud forecasts that reassured investors about the company’s long-term AI strategy. The upbeat outlook sent Microsoft’s shares more than 8% higher in extended trading.
The technology giant also said it expects to continue generating strong cash flows through its newly commenced fiscal 2027, despite ongoing investments in AI infrastructure and data centres.
Azure Continues to Drive Growth
Microsoft’s Azure cloud business reported 43% year-on-year revenue growth in the fiscal fourth quarter ended June 30, surpassing analysts’ expectations of around 40%.
Looking ahead, the company forecast 45% constant-currency growth for Azure in the first quarter of fiscal 2027, again exceeding market expectations.
Overall, Microsoft expects first-quarter revenue of approximately $90.4 billion at the midpoint of its guidance, above Wall Street estimates of $89.66 billion.
The strong cloud performance reinforces Microsoft’s position as one of the world’s leading cloud providers amid increasing competition from Amazon Web Services (AWS) and Google Cloud.
AI Investments Delivering Results
Microsoft said its extensive investments in artificial intelligence are beginning to translate into commercial growth.
Chief Executive Officer Satya Nadella said the company is increasingly developing its own AI models and custom AI chips, alongside its continued collaboration with OpenAI, to improve efficiency and provide customers with greater flexibility.
According to Nadella, Microsoft has achieved efficiency improvements of up to 40% through these efforts and is building an AI ecosystem that allows enterprises to choose technologies based on cost, performance and specific business requirements.
Copilot Adoption Accelerates
Microsoft also reported strong adoption of its AI-powered productivity assistant, Microsoft 365 Copilot.
Paid Copilot seats increased to more than 30 million, up from 20 million in the previous quarter and significantly ahead of analyst expectations.
The rapid adoption reflects growing enterprise demand for generative AI tools integrated into workplace productivity applications.
Capital Spending Remains Elevated
The company continues to invest heavily in AI infrastructure.
Capital expenditure during the April–June quarter reached $41 billion, an increase of more than 70% compared with the same period last year.
Microsoft also disclosed that it has $329.1 billion in future data centre lease commitments scheduled to commence between fiscal years 2027 and 2033, highlighting the scale of its long-term AI infrastructure expansion.
At the same time, the company announced an accounting change that extends the depreciation period for long-term data centre leases from 15 years to 25 years, reducing reported annual capital expenditure without affecting actual investment plans.
Microsoft expects reported capital expenditure of around $50 billion during the first quarter of fiscal 2027 and approximately $175 billion during calendar year 2026.
Revenue and Profit Beat Expectations
For the fiscal fourth quarter, Microsoft reported:
- Revenue: $90 billion, up 18% year-on-year.
- Earnings per share (excluding OpenAI investment impact): $4.74, ahead of analysts’ estimates of $4.24.
- Free cash flow: $19.6 billion, exceeding market expectations despite declining from the previous year due to higher infrastructure spending.
The company also reported a cloud business contracted backlog of $678 billion, reflecting strong future demand from enterprise customers.
Strengthening Microsoft’s AI Leadership
The results suggest Microsoft’s aggressive investment in artificial intelligence and cloud infrastructure is beginning to generate measurable commercial returns.
Strong Azure growth, accelerating Copilot adoption and a substantial backlog of contracted cloud revenue reinforce investor confidence that Microsoft’s AI strategy is supporting both near-term financial performance and long-term competitive positioning in the rapidly evolving global AI market.
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