Microsoft's Azure cloud business grew 43% in the company's fiscal fourth quarter, blowing past its own forecast and surpassing $100 billion in annual revenue for the first time — fresh evidence of how artificial intelligence is reshaping the tech giant's growth.
The milestone came at a price. Capital spending hit a record $41 billion, largely to fund the AI buildout, and free cash flow fell 23% even as operating profit jumped 18%. In a departure from recent quarters, Microsoft shares rose more than 5% in after-hours trading instead of selling off.
Companywide, Microsoft reported revenue of $90 billion, up 18% year over year, and net income of $35.8 billion, up 31%. Adjusted earnings of $4.74 per share beat the $4.24 analysts expected, including a $3.2 billion gain on the company's investment in Anthropic.
The results showed both the promise and the pressure of the AI transition. Microsoft 365 Copilot surpassed 30 million paid seats, up from 20 million last quarter, though that still represents less than 7% of commercial seats. The company's backlog of signed but undelivered contracts, known as remaining performance obligation, jumped 84% to $678 billion — and Microsoft said all of the $51 billion quarterly increase came from customers other than the big AI model companies. Windows OEM revenue declined 7%, while Xbox content and hardware both fell double digits.
