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.
Q4 2026 in context
| Metric | Jun 2026 | Jun 2025 | Change |
|---|---|---|---|
| Revenue | $90.0B | $76.4B | +17.7% |
| Net income | $35.8B | $27.2B | +31.3% |
| Free cash flow | $19.6B | $25.6B | -23.2% |
| Gross margin | 67.2% | 68.6% | -1.4 pts |
| Operating margin | 45.1% | 44.9% | +0.2 pts |
| Net margin | 39.7% | 35.6% | +4.1 pts |
Figures for the quarter ended Jun 2026 and the quarter ended Jun 2025, as reported to the SEC. Fourth-quarter flows are derived as the fiscal year minus its first three quarters.
Each company's quarter ending in calendar Q2 '26, as reported to the SEC. A peer that reported no revenue figure for that quarter is left out.
How the stock took it
Microsoft Corporation closed at $393.35 on Jul 28, 2026, the last session before the report, and at $451.10 on Jul 30, 2026, the first session after it — +14.7% across the report.
| Earlier report | Close before | Close after | Change |
|---|---|---|---|
| Apr 29, 2026 | $429.25 | $407.78 | -5.0% |
| Jan 28, 2026 | $480.58 | $433.50 | -9.8% |
| Oct 29, 2025 | $542.07 | $525.76 | -3.0% |
Closes from the market's daily record. Each figure spans the report date — from the last session that closed before it to the first that closed after — because a company may report before the open or after the close.
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 |
Sources: company report · earnings call · publication coverage