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Microsoft Stock Surges on Strong Q4 Earnings and Cloud Growth
Summary
Microsoft shares jumped in after-hours trading after the company reported fiscal fourth-quarter results that beat analyst expectations, driven by accelerating growth in its Azure cloud unit and a reassuring outlook on AI spending.
Microsoft (MSFT) shares surged 8.9% in after-hours trading on Wednesday after the technology giant reported fiscal fourth-quarter earnings and revenue that significantly surpassed Wall Street forecasts, fueled by robust demand for its cloud and artificial intelligence services.
Earnings Beat Driven by Cloud Strength
For the three months ending June 30, Microsoft posted adjusted earnings per share of $4.74, well ahead of the consensus estimate of $4.24. Quarterly revenue grew 18% year over year to reach $90.01 billion, beating expectations of approximately $87.62 billion.
The key driver for the quarter was the company's Intelligent Cloud segment. Revenue from Azure, its flagship cloud computing platform, grew by 43%, exceeding the company's own guidance of 39% to 40%. This strong performance signals to investors that Microsoft's substantial investments in AI infrastructure are translating into tangible revenue growth. The company also noted accelerating AI monetization, with Microsoft 365 Copilot paid enterprise seats climbing to over 30 million from 20 million in the previous quarter.
Reassuring Outlook on AI Spending
AdInvestors also welcomed commentary from CFO Amy Hood, who confirmed that the company's capital expenditure plans for 2026 remain unchanged. This provided reassurance to the market, which had been concerned about the scale of Microsoft's $190 billion AI spending commitment. Hood also stated that the company expects to remain cash-flow positive into fiscal 2027.
Microsoft's GAAP net income was further boosted by a $3.2 billion gain from its investment in the AI lab Anthropic, underscoring the value of its strategic AI partnerships.
Market Context
The strong after-hours rally provided a sharp contrast to the regular trading session, where the broader market sold off. The S&P 500 and Nasdaq both closed lower amid investor anxiety following a Federal Reserve decision to hold interest rates steady, with some dissent among policymakers. Microsoft's stock had been under pressure for much of 2026, and the strong earnings beat at a relatively discounted valuation helped amplify the positive investor reaction.
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