Microsoft (MS) beat market expectations on the back of rising demand for artificial intelligence (AI) and cloud services. Capital spending jumped due to AI infrastructure investment, but the company absorbed part of the investment burden while maintaining revenue and profit growth.
MS said on the 29th (local time) that fiscal year fourth-quarter (April–June) revenue rose 18% from a year earlier to $90 billion. That topped the market estimate of $87.62 billion. Annual revenue also increased 18% to $331.8 billion.
Growth was led by the Intelligent Cloud business centered on Azure. Revenue in this institutional sector rose 31.6% to $39.31 billion. Azure's growth rate increased to 43% from 40% in the previous quarter, and annual Azure revenue topped $100 billion for the first time. MS 365 Copilot paying users also surpassed 30 million.
Earnings per share (EPS) for the quarter were $4.74, beating the market forecast of $4.24. This reflected a $3.2 billion valuation gain from an equity investment in Anthropic.
The investment burden grew. Quarterly capital expenditures surged 69% to $41 billion, and free cash flow fell 23% to $19.64 billion. About two-thirds of capital spending went to securing CPUs and GPUs needed to run Azure and AI services.
However, remaining performance obligations expected to convert to future revenue rose quickly. MS's commercial remaining performance obligation reached $678 billion, up 84%, and quarterly cloud revenue came in at $59.3 billion. Annual cloud revenue exceeded $214 billion, and about 90% of it came from customers other than cutting-edge AI model companies. That means AI demand is spreading across general corporations rather than relying only on a few large model firms.
After the earnings release, MS shares rose about 2.5% in after-hours trading.