Microsoft Q4 2026 earnings: Azure growth drives beat as AI spending surges
Microsoft beat profit and revenue expectations, powered by accelerating Azure cloud growth, even as it ramped up AI-related spending.
| Q4 2026 | Reported | Expected | Surprise |
|---|---|---|---|
| EPS | $4.74 | $4.33 | +9.5% |
| Revenue | $90.01B | $89.37B | +0.7% |
Key takeaways
- Microsoft topped Wall Street’s expectations on both profit and sales, with earnings and revenue coming in comfortably above what analysts had penciled in.
- The star of the quarter was Azure, Microsoft’s cloud computing business, which grew 43% and helped push the company’s annual cloud revenue over $100 billion for the first time.
- The Productivity and Business Processes unit, which includes Microsoft 365 and Teams, grew about 14% to $37.85 billion, beating analyst forecasts as more business customers added Copilot AI features to their subscriptions.
- More Personal Computing, the segment covering Windows, devices and Xbox, was a rare soft spot, with revenue down about 4% as Windows OEM/device sales and Xbox both declined.
- Microsoft’s high (and expanding) margins mean it keeps a large share of every new revenue dollar as profit, which is part of why earnings grew faster than sales this quarter.
- Spending on data centers and AI hardware jumped sharply, up 69% for the quarter, as Microsoft races to build enough capacity to meet AI and cloud demand; it added 31 new data centers in the quarter, bringing the year’s total to 88.
- Microsoft trimmed its full-year capital spending outlook to roughly $175 billion from an earlier $190 billion, though executives said the change mainly reflects a longer estimated useful life for its buildings and equipment rather than pulling back on AI investment.
- CEO Satya Nadella said the time it takes to get customers to adopt Microsoft 365 Copilot has shrunk from months to days, and said usage of the AI assistant has reached levels comparable to established tools like Outlook and Teams.
- Shares jumped in after-hours trading following the report, as investors welcomed the accelerating cloud growth and record annual results.
Fundamentals
| Metric | Value | Period |
|---|---|---|
| Gross margin | 67.9% | Trailing 12 months |
| Operating margin | 46.7% | Trailing 12 months |
| Net profit margin | 40.3% | Trailing 12 months |
| Pretax margin | 50.0% | Trailing 12 months |
| EPS | $17.95 | Trailing 12 months |
| Revenue growth (YoY) | 17.8% | Trailing 12 months |
| EPS growth (YoY) | 31.6% | Trailing 12 months |
| Return on equity | 33.2% | Trailing 12 months |
Microsoft Corporation financial history: revenue, margins, and cash flow →
Sources: company report · earnings call · publication coverage