Azure growth reaccelerated to 43% and the backlog hit $678 billion. On an adjusted basis, though, profit rose 22% and capital spending set a record.
Published: Thursday, 30 July 2026 | BrandClickX News Desk
This is financial news reporting, not investment advice. Figures come from Microsoft’s own results release for the quarter ended 30 June 2026, published 29 July 2026. Consult a licensed financial adviser before making investment decisions.
Summary
Microsoft reported fourth-quarter revenue of $90 billion on 29 July 2026, up 18% year on year, with GAAP net income rising 31% to $35.8 billion. Azure and other cloud services grew 43% in the quarter, taking Azure past $100 billion in annual revenue for the first time. Capital spending hit a record $41 billion, and free cash flow fell 23%.
Key Takeaways
- Q4 revenue $90 billion, up 18%, beating the $87.63 billion consensus
- GAAP net income up 31% to $35.8 billion; non-GAAP up 22%
- The gap reflects discrete items worth $0.27 per share, including a $3.2 billion Anthropic gain
- Azure and other cloud services grew 43% in the quarter
- Azure annual revenue passed $100 billion for the first time
- FY26 revenue $331.8 billion, net income $133.7 billion
- Capital expenditure hit a record $41 billion in the quarter
- Free cash flow fell 23% despite operating profit rising 18%
- Backlog reached $678 billion and grew 25% excluding OpenAI
- Microsoft 365 Copilot passed 30 million paid seats
What Microsoft Reported
Revenue and profit both beat expectations, and Azure reaccelerated.
| Metric | Q4 FY2026 | Change |
| Revenue | $90.0bn | +18% |
| Operating income | $40.6bn | +18% |
| GAAP net income | $35.8bn | +31% |
| GAAP diluted EPS | $4.81 | +32% |
| Non-GAAP net income | $35.3bn | +22% |
| Non-GAAP diluted EPS | $4.74 | +23% |
| Microsoft Cloud revenue | $59.3bn | +27% |
| Intelligent Cloud revenue | $39.3bn | +32% |
| Azure and other cloud services | — | +43% |
Wall Street had expected earnings of $4.24 a share on revenue of $87.63 billion. Microsoft beat both.
For the full fiscal year ended 30 June 2026:
- Revenue $331.8 billion, up 18%
- Operating income $155.2 billion, up 21%
- Net income $133.7 billion, up 31%
- Diluted EPS $17.95, up 32%
Microsoft returned $10.2 billion to shareholders through dividends and buybacks in the quarter.
The Azure Milestone
Azure and other cloud services passed $100 billion in annual revenue for the first time.
CEO Satya Nadella made it the headline of his own commentary: “This year, Azure revenue surpassed $100 billion for the first time.”
More important than the round number is the direction. Azure grew 43% in the fourth quarter an acceleration, not a plateau, which is what investors had been watching for after a year of questions about whether AI-driven cloud demand was peaking.
Microsoft Cloud gross margin came in at 65%, which CFO Amy Hood described as better than expected.
Now the Footnote
The 31% profit jump is a GAAP figure. On an adjusted basis, profit rose 22%.
That nine-point gap is not an accounting quirk Microsoft flagged it in its own release.
The company disclosed that discrete items produced a benefit of $0.27 on diluted earnings per share relative to the guidance it gave on 29 April. Those items were:
- A $3.2 billion gain on Microsoft’s investment in Anthropic
- Lower-than-expected costs from its Voluntary Retirement Program
- Partly offset by severance and impairment charges in Xbox
Constellation Research reported the Xbox severance charges alone cost six cents a share.
Microsoft noted that adjusting for these items, it still exceeded expectations on revenue, operating income and diluted EPS. That is the fair reading the beat was real, but the headline profit growth was flattered by a one-off investment gain.
The clean comparison is the non-GAAP line: net income up 22%, EPS up 23%. Both strong. Neither 31%.
What the AI Spending Actually Costs
Capital expenditure hit a record in the quarter, and free cash flow went backwards.
Microsoft spent roughly $41 billion on capital expenditure in Q4, with about two-thirds going to what it calls “short-lived assets” the CPUs and GPUs used to serve AI and non-AI workloads.
It added 31 new datacentres across five continents in the quarter, bringing the FY26 total to 88.
The consequence: free cash flow fell 23% even as operating profit rose 18%. Microsoft is converting an enormous amount of cash into physical capacity on the assumption that demand keeps arriving to fill it.
A sourcing note: most reporting puts Q4 capex at $41 billion. At least one outlet listed $35.8 billion identical to the net income figure, which suggests a transposition error. Use $41 billion.
The Number That Answers the Biggest Worry
Microsoft’s backlog reached $678 billion, and the growth did not come from AI labs.
For the past year the sceptical case against Microsoft has been that its commercial bookings were essentially OpenAI’s spending recycled through Azure — impressive on paper, dangerously concentrated in practice.
Microsoft addressed it directly. The company said the entire $51 billion sequential increase in commercial bookings came from customers other than the large AI model companies, and that excluding OpenAI, the backlog still grew 25%.
If accurate, that is the single most reassuring disclosure in the release. It means enterprise AI demand is broadening rather than resting on a handful of frontier labs.
Copilot and the In-House Model Push
Microsoft 365 Copilot passed 30 million paid seats, doubling in two quarters.
The company reported net seat additions more than doubling quarter over quarter. For context, Microsoft reported 15 million paid Copilot seats in its FY26 second quarter.
It also said the Microsoft 365 E7 licence has seen purchases of “millions of seats,” without giving a figure.
Still undisclosed: monthly active users for Teams. The last number Microsoft published was 320 million, eleven quarters ago in FY24 Q1.
The strategic shift worth noting is MAI, Microsoft’s family of in-house models, now spanning image, voice, transcription, coding and security, including its first reasoning model. Microsoft says it co-designs them with its Maia 200 accelerator and gets 40% better performance per watt as a result.
Microsoft continues to sell OpenAI, Anthropic, Mistral and xAI models through its catalogue while holding stakes in some of them. But Nadella is now positioning MAI and Copilot agents as a cheaper alternative, and advising enterprises not to depend on any single frontier lab at the application layer.
That is a meaningful repositioning from a company whose AI story was, until recently, largely an OpenAI story.
Nadella’s Framing
Nadella’s chosen phrase was that Microsoft is “advancing the frontier on the cost-to-outcome curve“ ensuring customers can turn tokens into business results.
Stripped of the jargon, it signals where the emphasis has moved: from demonstrating that AI works to making it cheap enough to be profitable. On the analyst call, executives discussed efficiency gains in GPU cost per AI workload, including for Copilot in PowerPoint.
After two years of spending, cost per inference is becoming the metric that matters.
Market Reaction
Shares rose roughly 2% to 3% in after-hours trading following the release, with reports varying slightly on the figure.
GuruFocus listed the stock at $390.54 with a market capitalisation of about $2.9 trillion, and noted net insider selling of $10.5 million over the previous three months.
Prices move constantly. Check a live quote rather than relying on these figures.
Timeline
| Date | Development |
| FY26 Q2 | Microsoft reports 15 million paid Copilot seats |
| 29 Apr 2026 | Microsoft issues Q4 guidance |
| 30 Jun 2026 | Fiscal year and quarter close |
| 29 Jul 2026 | Q4 and full-year FY26 results published |
| FY26 full year | Azure passes $100bn; 88 new datacentres added |
Expert Analysis
The verdict on Microsoft’s AI bet after this quarter is good rather than triumphant, and the distinction matters.
What is genuinely strong: Azure accelerating to 43% growth, the $100 billion annual milestone, a 65% cloud gross margin, Copilot doubling paid seats in two quarters, and a backlog that grew 25% even excluding OpenAI. That last figure dismantles the concentration-risk argument more effectively than any amount of management commentary.
What deserves scrutiny: the gap between 31% GAAP profit growth and 22% adjusted growth is a $3.2 billion Anthropic gain. Investment gains are real money, but they are not recurring operating performance, and a headline built on them overstates the underlying trend.
What remains unresolved: free cash flow falling 23% while capex hits a record. Microsoft is buying capacity years ahead of the revenue that has to justify it, and two-thirds of that spend is on hardware it classifies as short-lived. The bet is that utilisation stays high. The backlog suggests it will. The depreciation schedule does not forgive being wrong.
Nadella’s pivot toward MAI models and cost-per-outcome efficiency reads as an acknowledgement of exactly that pressure.
Frequently Asked Questions
What were Microsoft’s Q4 FY2026 results?
Revenue of $90 billion, up 18%, with GAAP net income up 31% to $35.8 billion and diluted EPS of $4.81. Non-GAAP EPS was $4.74, beating the $4.24 analysts expected.
Did Azure really pass $100 billion?
Yes. Azure and other cloud services surpassed $100 billion in annual revenue for the first time in Microsoft’s 2026 fiscal year, which ended 30 June. Azure grew 43% in the fourth quarter alone.
Why did profit rise 31% on a GAAP basis but 22% adjusted?
Discrete items added $0.27 to diluted EPS, chiefly a $3.2 billion gain on Microsoft’s Anthropic investment and lower voluntary retirement costs, partly offset by Xbox severance and impairment charges.
How much is Microsoft spending on AI infrastructure?
Capital expenditure reached roughly $41 billion in the fourth quarter, about two-thirds of it on short-lived assets such as CPUs and GPUs. Microsoft added 31 datacentres in the quarter and 88 across the fiscal year.
Is Microsoft’s growth dependent on OpenAI?
Less than feared. Microsoft said the entire $51 billion sequential increase in commercial bookings came from customers other than large AI model companies, and that its backlog grew 25% excluding OpenAI.
How many Copilot users does Microsoft have?
More than 30 million paid Microsoft 365 Copilot seats, with net additions more than doubling quarter over quarter. Microsoft reported 15 million paid seats two quarters earlier, in FY26 Q2.
What are MAI models?
Microsoft’s family of in-house AI models covering image, voice, transcription, coding and security, including its first reasoning model. Microsoft co-designs them with its Maia 200 accelerator, claiming 40% better performance per watt.
What was Microsoft’s full-year FY2026 revenue?
$331.8 billion, up 18% year on year. Operating income rose 21% to $155.2 billion, net income rose 31% to $133.7 billion, and diluted earnings per share climbed 32% to $17.95.
Conclusion
Azure crossing $100 billion is a genuine landmark, and 43% growth at that scale is the number that answers the question Microsoft went into this quarter facing.
The 31% profit headline needs an asterisk. Strip the Anthropic gain and the retirement-programme benefit and you get 22% still excellent, and closer to what the business actually did.
The open question is the one the balance sheet poses rather than the income statement. Record capex, free cash flow down 23%, and two-thirds of the spending on hardware with a short life. A $678 billion backlog that grows without OpenAI is the best possible answer to that. It is not yet a complete one.
