Microsoft posted stronger-than-expected fiscal fourth-quarter results, with Azure cloud growth accelerating to 43% in constant currency and beating analyst forecasts of around 39.6%.
The company's adjusted earnings of $4.74 per share exceeded consensus of $4.25 on $90 billion in revenue (up 18% year-over-year), and paid Copilot seats doubled to 30 million.
Citizens reiterated a Market Outperform rating, reflecting confidence in Microsoft's cloud and AI strategy despite mounting infrastructure spending.
What happened
Microsoft reported fiscal fourth-quarter adjusted earnings of $4.74 per share on $90 billion in revenue (up 18% year-over-year), topping the consensus forecast of $4.25. Azure cloud growth accelerated to 43% in constant currency, up from 39% last quarter and beating forecasts of around 39.6%. Paid Copilot seats grew to 30 million from 20 million in the prior quarter.
Why it matters
Citizens reiterated a Market Outperform rating and $550 price target, signaling confidence in Microsoft's cloud and artificial intelligence strategy. The stronger-than-expected results demonstrate that demand for AI-powered cloud services remains robust, underpinning the company's large infrastructure investments.
What to watch
Microsoft projects Azure growth of 45% in constant currency for fiscal first quarter and forecasts sales between $89.85 billion and $90.95 billion for that same period. The company also reduced its 2026 capital expenditure guidance to $175 billion from $190 billion, citing extended expected useful lifetimes for data centers and office buildings—a signal it may be gaining efficiency from recent spending.
Microsoft delivered fiscal fourth-quarter results that exceeded expectations and reignited confidence in its cloud and artificial intelligence strategy. The company reported adjusted earnings of $4.74 per share on $90 billion in revenue, up 18% from the same quarter a year earlier. The earnings figure topped the consensus forecast of $4.25 per share, while the revenue increase outpaced analyst expectations. On the strength of these results, Citizens Securities reiterated a Market Outperform rating and set a $550 price target.
The standout performance came from Azure, Microsoft's cloud computing service. Azure growth accelerated to 43% in constant currency, jumping from 39% in the prior quarter and beating forecasts of around 39.6%. This acceleration is significant because it demonstrates that customers are expanding their use of Microsoft's cloud infrastructure to run artificial intelligence workloads. Complementing this momentum, adoption of Copilot—Microsoft's AI assistant software—also rose sharply. Paid Copilot seats grew to 30 million from 20 million in the previous quarter, indicating rapid enterprise adoption of the AI feature. Together, these figures underscore that Microsoft's strategy to combine cloud scale with AI capabilities is resonating with customers.
Microsoft's capital discipline is also shifting. The company reported capital expenditures of $41 billion and free cash flow of $19.6 billion in the quarter. Looking ahead, Microsoft cut its 2026 capital investment guidance to $175 billion from the prior guidance of $190 billion. The company attributed this reduction to extended expected useful lifetimes for data centers and office buildings, suggesting it believes its current infrastructure investments will remain productive for longer. For the fiscal first quarter, Microsoft projects sales between $89.85 billion and $90.95 billion and forecasts a 45% increase in Azure growth in constant currency. The central question for investors is whether Azure can sustain this momentum while Microsoft manages the mounting costs of infrastructure required to power artificial intelligence services.
Microsoft's fiscal fourth-quarter results mark a turning point in how the market views the company's massive cloud and AI infrastructure investments. The 43% Azure growth in constant currency substantially outpaced last quarter's 39% and beat analyst expectations of around 39.6%, demonstrating that the company's spending on data centers and AI capabilities is translating into real customer demand. Equally important, the company's Copilot business is scaling rapidly—paid seats have doubled to 30 million in a single quarter—signaling broad enterprise adoption of AI features. This momentum is reflected in Citizens' reiterated Market Outperform rating and $550 price target, suggesting analysts believe Microsoft has moved past concerns that its infrastructure expenses might exceed near-term revenue returns.
The adjusted 2026 capital guidance cut from $190 billion to $175 billion is a nuanced signal. Rather than a retreat, Microsoft attributed the reduction to extended expected useful lifetimes for data centers and office buildings, implying the company believes its existing infrastructure will be productive longer than previously assumed. This may suggest either that the company has built capacity ahead of demand faster than expected or that efficiency gains in operations allow it to spread current assets across a longer period. Investors will track whether Azure can sustain the 45% growth rate Microsoft is projecting for the fiscal first quarter while the company continues to balance massive infrastructure spend against profitability and free cash flow ($19.6 billion last quarter).
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