Microsoft Azure Q4 revenue surges 41%, tops $100 billion in annual revenue

Microsoft's fourth quarter earnings were better-than-expected, Azure revenue for fiscal 2026 topped $100 billion and net income was boosted by investments in OpenAI and Anthropic.

The quarter included a bevy of moving parts. Microsoft reported fourth quarter earnings of $35.8 billion, or $4.81 a share, on revenue of $90 billion, up 18% from a year ago. Non-GAAP fourth quarter earnings were $4.74 a share.

Wall Street was expecting Microsoft to report fourth quarter earnings of $4.24 a share on revenue of $87.63 billion.

Moving parts included:

• Net income was boosted by $2 billion in the quarter from the investments in OpenAI and Anthropic.
• OpenAI gains were $3.4 billion. Anthropic delivered a gain of $3.2 billion.
• Severance charges from Xbox hit diluted earnings by 6 cents a share.

Satya Nadella, CEO of Microsoft, said the company is "advancing the frontier on the cost-to-outcome curve, ensuring every customer can turn tokens into business results."

Azure revenue in the fourth quarter was up 43% from a year ago accelerating from 40% in the third quarter.

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Capital expenditures for the fourth quarter were $41 billion, up 70% from the previous year. The company noted: "Roughly two-third of capital expenditures were for short-lived assets, primarily CPUs and GPUs." Microsoft's free cash flow in the fourth quarter was $19.6 billion, down 23% from a year ago.

For fiscal 2026, Microsoft spent more than $145 billion on CapEx.

Microsoft Cloud revenue in the quarter was $59.3 billion, up 27% from a year ago. CFO Amy Hood said the quarter closed strong.

By the numbers:

• Revenue from productivity and business processes was $37.8 billion, up 14% from a year ago.
• Microsoft 365 Commercial cloud revenue was up 16% from a year ago. Microsoft 365 Consumer cloud revenue was up 24% from a year ago.
• Intelligent Cloud revenue was $39.3 billion, up 32% from a year ago. Azure and other cloud services revenue was up 43% in the fourth quarter.
• Windows and devices revenue fell 7%.

For fiscal 2026, Microsoft reported net income of $133.7 billion, or $17.95 a share, on revenue of $331.8 billion, up 18% from a year ago.