Microsoft Stock Rises on Strong Earnings. Most Important, CapEx Holds Steady -- Barrons.com

By Adam Levine

Microsoft reported strong fiscal fourth-quarter results on Wednesday afternoon. The stock was up as much 9% in after-hours trading before giving up some of those gains.

Microsoft batted back two negative narratives with the results, showing a return on its extensive cloud investments and a software segment that keeps beating expectations.

Earnings per share were $4.81 for the quarter, up from $3.65 a year ago and above Wall Street projections of $4.24. The result included 27 cents of unusual accounting benefits including a $3.2 billion unrealized gain on Microsoft's Anthropic investment. During the fourth quarter, Anthropic's equity valuation went from $350 billion to $900 billion.

Microsoft's revenue for the quarter reached $90 billion, ahead of expectations for $87.6 billion, and up 18% on the year.

As expected, capital expenditures reached around $41 billion, hitting $145 billion for the fiscal year. Chief Financial Officer Amy Hood said the company's capex forecast for 2026 remains unchanged, after adjusting for an accounting update. The stock jumped on the news, trading up as much as 8% in after-hours trading.

Microsoft's capex forecast stands in stark contrast to Alphabet's results last week; Alphabet shares tanked last week when it raised its 2026 capex guidance during its earnings call.

Microsoft and the other big artificial intelligence spenders are throwing hundreds of billions of dollars into new data centers, and investors are once again asking the timeless question: where's the return?

The closely-watched sales growth rate in the company's Azure cloud unit was 43% versus expectations of 40%.

Azure sits with server software products in Microsoft's Intelligent Cloud segment and its sales were up 32% with a 40.6% operating margin, the same as last year. Microsoft has been able to offset rising depreciation expenses, and the segment outpaced Wall Street's expectations all around.

Microsoft's business software segment also saw the same sort of upside surprise. Segment sales grew at 15%, better than expected, and operating margin defied Wall Street estimates by increasing a little from last year. The segment's results could push back on the bearish software narrative that has driven Microsoft stock down 19% this year. Investors have worried AI could pressure software sales and thin margins.

The business software segment has now outperformed Wall Street sales projections 16 quarters in a row.

Adoption for Microsoft's flagship AI business software, Microsoft 365 Copilot, also improved. When the company first began reporting user numbers six months ago, only 3% of the more than 450 million Microsoft 365 users were paying for Copilot. Now that's nearly 7% -- still small, but growing rapidly.

Microsoft also gave strong guidance for the third quarter and fiscal year 2027, especially in the cloud and business software segments.

Write to Adam Levine at adam.levine@barrons.com

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July 29, 2026 18:25 ET (22:25 GMT)