MSFT Stock Jumps 8% After Strong Microsoft Earnings and Azure Growth

MSFT stock surged in extended trading on Wednesday after Microsoft reported stronger-than-expected fiscal fourth-quarter results.

Microsoft shares closed the regular trading session at $390.54, down 0.71% from the previous close of $393.35. However, the stock reversed sharply after the earnings announcement, and climbed 8.88% to approximately $425.21 in after-hours trading.

Microsoft share price (Source: Google Finance)

The rally came after Microsoft reported quarterly revenue growth of approximately 18% year over year for the period ended June 30.

Net income increased to $35.77 billion, or $4.81 per share, compared with $27.23 billion, or $3.65 per share, during the same quarter last year. The result included a $3.2 billion gain related to Microsoft’s investment in artificial intelligence company Anthropic, as well as lower-than-expected expenses from its voluntary retirement program.

Transcript from Microsoft’s earnings call

Azure Growth Supports MSFT Stock Rally

Microsoft’s Intelligent Cloud division, which includes Azure, generated revenue of $39.31 billion, which was an increase of 31.6% from the previous year. The result exceeded analysts’ consensus estimate of approximately $38.16 billion.

Azure revenue increased 43%, both on a reported and constant-currency basis. This was an acceleration from the 40% growth recorded in the previous quarter and exceeded analysts’ expectations of roughly 40%.

Microsoft also said annual Azure revenue surpassed $100 billion for the first time during its 2026 fiscal year. The results suggest that demand for Microsoft’s cloud and AI services is still strong despite investor concerns that generative AI could disrupt established software companies.

Microsoft Plans Continued AI Infrastructure Spending

Microsoft reported quarterly capital expenditures and finance leases of approximately $41 billion, an increase of 69% year over year. Chief Financial Officer Amy Hood shared some details about the company’s 2026 capital-spending plans. 

Microsoft expects capital expenditures and finance leases to reach approximately $175 billion, although accounting changes will affect how some future data center investments are classified.

The company plans to extend the estimated useful life of office and data center buildings from 15 years to 25 years. More data center leases will also be recorded as operating leases rather than finance leases.

Microsoft expects capital expenditures to increase again during fiscal 2027, due to strong demand signals across its product portfolio.

Commercial Backlog Reaches $678 Billion

Microsoft’s commercial remaining performance obligations increased 8% from the previous quarter to $678 billion. The metric includes contracted revenue that has not yet been recognized. Microsoft said sequential growth was driven by customer commitments outside of AI model developers, which suggests that demand was not entirely dependent on a small number of large AI companies.

However, analysts raised some concerns about Microsoft’s exposure to OpenAI. The company previously said that approximately 45% of its $625 billion commercial backlog was associated with OpenAI, creating potential concentration risk as open-source AI models gain adoption.

Despite the strong after-hours reaction, MSFT stock is still down approximately 19% in 2026.