Microsoft revenue hits $90B as AI fuels record quarter
What's the story
Microsoft's shares rose by 8% in after-hours trading on Wednesday, following the company's announcement of a strong fiscal fourth-quarter revenue and steady 2026 capital expenditure plans. The tech giant reported an adjusted earnings per share of $4.74, surpassing the LSEG consensus estimate of $4.24 per share. Its revenue also exceeded expectations at $90.01 billion, against an anticipated $87.62 billion.
Financial performance
Fiscal 4th-quarter revenue grew nearly 18% year-on-year
Microsoft's fiscal fourth-quarter revenue, which ended on June 30, grew by nearly 18% year-on-year.
The company reported a net income of $35.77 billion or $4.81 per share, up from $27.23 billion or $3.65 per share in the same quarter last year.
This growth was driven by a $3.2 billion gain from its investment in AI lab Anthropic and lower-than-expected costs associated with its first voluntary retirement program.
Market reaction
Microsoft's shares have fallen by 19% in 2026 so far
Microsoft's shares have fallen by 19% in 2026 so far. This is in stark contrast to the S&P 500 index, which has gained nearly 7% during the same period.
The decline can be attributed to investor concerns over potential disruptions from generative artificial intelligence models.
Deutsche Bank analysts recently warned of "some concentration risk" with Microsoft's OpenAI partnership amid the rise of open-source models.
Future outlook
CFO confirms capital spending plans for 2026
Microsoft's CFO Amy Hood confirmed the company's 2026 capital spending plans, which will see the useful life of office and data center buildings extended from 15 to 25 years.
She also announced that more future data center leases would be classified as operating leases instead of finance leases.
This change is expected to result in approximately $175 billion in capital expenditures and finance leases.
However, free cash flow for the quarter fell by 23% to $19.64 billion.
Segment performance
Revenue from Intelligent Cloud and Productivity and Business Processes segments
Microsoft's Intelligent Cloud segment, which includes Azure, generated $39.31 billion in revenue, 31.6% more than last year.
This was also higher than the expected $38.16 billion by analysts polled by StreetAccount.
The Productivity and Business Processes segment, which includes Office, Dynamics, and LinkedIn, also beat expectations with a revenue of $37.85 billion, 14.3% more than last year and above the expected $37.19 billion by StreetAccount analysts.
Market challenges
More Personal Computing segment's performance in fiscal 4th quarter
The More Personal Computing segment, which includes Bing, Surface, Windows, and Xbox, generated a revenue of $12.85 billion, down 4.4% from last year but higher than the expected $12.17 billion by StreetAccount analysts.
The company attributed the decline to a 7% drop in device sales and Windows licenses to device makers amid a 4.2% fall in PC shipments as estimated by technology industry researcher Gartner.