Microsoft closed fiscal year 2026 with a record quarter. Shares rise 7%.
On Wednesday, July 29, Microsoft released results for the fourth quarter of fiscal year 2026, beating analyst estimates for revenue, profit, and the metric the entire report hinged on—growth of the Azure cloud platform. Azure accelerated to 43% and its annual revenue surpassed the $100 billion mark for the first time in history. Yet the market primarily watched a different number: capital expenditures.
Key points
Revenue reached $90.0 billion, up 18%, or 17% in constant currency. The analyst consensus was around $87.6 billion.
Operating profit rose 18% to $40.6 billion, while GAAP net income increased 31% to $35.8 billion.
Earnings per share came in at $4.81 GAAP and $4.74 adjusted for the impact of OpenAI investments. The consensus had expected $4.24.
Commercial backlog surged 84% to $678 billion.
Quarterly capital expenditures reached $41 billion, a 70% increase. Free cash flow, however, fell 23% to $19.6 billion.
The fourth fiscal quarter closes Microsoft's full fiscal year, making it traditionally the most informative report. Investors get their first look at the outlook for the new fiscal year and a complete picture of how much the company actually invested over twelve months. This year, that combination was even more sensitive than usual. Microsoft shares entered the report after a notably weak first half, having shed about 19% since the start of the year and sitting nearly 30% below their all-time high.
The reason wasn't weak results—Microsoft beat analyst estimates in all four quarters of fiscal 2026. The problem was structural. The market began to doubt whether the hundreds of billions of dollars invested in data centers and computing infrastructure would translate into revenue quickly enough. This skepticism wasn't limited to Microsoft. Alphabet $GOOG reported a week earlier with revenue up 24% and cloud division growth of 82%, but simultaneously raised planned capital expenditures toward $205 billion, and its shares weakened 7% the following day. The market thus clearly signaled that simply beating estimates was no longer enough.
Microsoft's result is interesting in this context precisely because it delivered both: accelerating cloud growth and continued acceleration of investments. Let's first look at the numbers themselves.
Fourth-quarter results in numbers
Consolidated results for the three months ending June 30, 2026 exceeded estimates across the entire income statement. Revenue grew 18%, operating profit at the same pace, and GAAP net income by as much as 31%. The gap between operating and net income growth wasn't accidental—it reflects the company's strategy, which we'll explain in the following subsection.
Table 1 of 8: Consolidated results for Q4 FY2026 (in millions of dollars)
Metric | Q4 FY2026 | Q4 FY2025 | Y/Y Change |
Total revenue | 90,007 | 76,441 | +18% |
Cost of revenue | 29,525 | 24,014 | +23% |
Gross margin (value) | 60,482 | 52,427 | +15% |
Research and development | 9,997 | 8,829 | +13% |
Operating profit | 40,603 | 34,323 | +18% |
Other income, net | 3,444 | (1,707) | reversal |
Net income (GAAP) | 35,766 | 27,233 | +31% |
Net income (non-GAAP) | 35,286 | 28,808 | +22% |
Earnings per share, GAAP (USD) | 4.81 | 3.65 | +32% |
Earnings per share, non-GAAP (USD) | 4.74 | 3.86 | +23% |
Source: Microsoft press release for FY26 Q4 results. Values in parentheses represent negative items.