Key Highlights

  • Fourth-quarter revenue rose 18% year over year to $90.0 billion, with Microsoft Cloud revenue up 27%.
  • Azure and other cloud services revenue grew 43%, pushing full-year Azure revenue above $100 billion.
  • GAAP net income increased 31% to $35.8 billion, aided by a $3.2 billion gain tied to Microsoft's investment in Anthropic.
  • Commercial remaining performance obligation increased 84% year over year to $678 billion.

Azure Crosses a Symbolic Threshold as Cloud Growth Accelerates

Microsoft Corporation (NASDAQ:MSFT) reported fiscal fourth-quarter revenue of $90.0 billion, up 18% from a year earlier, with Intelligent Cloud segment revenue rising 32% to $39.3 billion. Azure and other cloud services revenue grew 43% during the quarter, contributing to full fiscal year Azure revenue surpassing $100 billion for the first time.

Microsoft Cloud revenue, which spans Azure, Microsoft 365 commercial offerings, and other cloud services, reached $59.3 billion for the quarter, up 27% year over year. Commercial remaining performance obligation, a measure of contracted future revenue, increased 84% to $678 billion, suggesting substantial revenue visibility extending beyond the current fiscal year.

Investment Gains and Restructuring Costs Complicate the Earnings Picture

GAAP net income rose 31% to $35.8 billion, and diluted earnings per share increased 32% to $4.81. These results included a $3.2 billion gain from Microsoft's investment in Anthropic, alongside lower-than-expected costs from a voluntary retirement program, partially offset by severance expenses and impairment charges within the Xbox business.

On a non-GAAP basis, which excludes the impact of Microsoft's OpenAI investment, net income grew a more modest 22% to $35.3 billion, with diluted earnings per share of $4.74. The gap between GAAP and non-GAAP results stemmed from a $480 million net gain from OpenAI investments in the current quarter, compared with a $1.6 billion net loss from the same investment a year earlier, a swing that management said reflects the accounting volatility inherent in large minority stakes in fast-growing AI companies.

Microsoft 365 Commercial cloud revenue increased 14%, while the More Personal Computing segment, which includes Windows and Xbox, declined 4% as Windows OEM revenue fell 7% and Xbox content and services revenue dropped 10%. The company returned $10.2 billion to shareholders through dividends and buybacks during the quarter.

Copilot Adoption and Cloud Bookings Support the Outlook, But Segment Divergence Continues

Chief Executive Officer Satya Nadella pointed to Microsoft 365 Copilot reaching over 30 million paid seats as evidence of enterprise AI adoption gaining traction, alongside Azure's milestone revenue crossing. The scale of commercial remaining performance obligation growth suggests customers are committing to multi-year cloud contracts at an accelerating pace, which could support continued Intelligent Cloud segment growth into fiscal 2027.

Some factors could complicate this trajectory. The volatility introduced by mark-to-market accounting on Microsoft's OpenAI and Anthropic investments means reported GAAP earnings may continue to diverge meaningfully from underlying operating performance, complicating quarter-to-quarter comparisons for investors. The continued decline in More Personal Computing revenue, driven by weaker Windows OEM and Xbox content sales, also suggests that growth remains concentrated in cloud and productivity segments rather than being broad-based across the company.

Capital intensity remains a further consideration, with total additions to property and equipment reaching $115.9 billion for the fiscal year, more than 80% higher than the prior year, as the company continues building data center capacity to support AI workloads.

Conclusion

Microsoft's fiscal fourth quarter reflected continued strength in cloud and AI-related revenue, highlighted by Azure surpassing $100 billion in annual revenue and a sharp increase in commercial bookings. Reported earnings growth was flattered by investment gains that may not recur at the same magnitude, and the divergence between strong cloud performance and softer consumer hardware results suggests growth durability will depend heavily on whether current enterprise AI adoption trends, including Copilot's expanding seat count, continue translating into sustained cloud consumption.