Microsoft Azure Surpasses $100B Annual Revenue as AI Investments Deliver Mixed Returns

Microsoft reported fiscal fourth-quarter revenue of $90.1 billion on July 29, up 18% year over year, as Azure and other cloud services revenue grew 43% to push the cloud business past $100 billion in annual revenue for the first time. The company also disclosed that its investment in Anthropic generated a $3.2 billion gain in the quarter, while its OpenAI stake was marked down by approximately $600 million.

Azure revenue growth of 43% exceeded analyst estimates of 40%, according to CNBC. Microsoft's commercial remaining performance obligations, a measure of future contracted revenue, more than doubled over the past five quarters to $678 billion, up 84% year over year.

AI Copilot Adoption Accelerates, Capex Surges

Microsoft 365 Copilot paid seats reached 30 million in Q4, up from 20 million in the prior quarter, a 50% increase. The company's capital expenditure rose 70% year over year to $41 billion in the quarter. An accounting change lowered Microsoft's fiscal 2026 capex forecast to $175 billion from $190 billion, but the company said its actual spending plans remain unchanged.

• Operating income hit $40.6 billion, above the $39.1 billion estimate.
• Earnings per share came in at $4.74, beating the $4.22 consensus.
• Net income rose 31% year over year to $36 billion.
• Bing advertising revenue grew 10% year over year.
• Microsoft shares jumped more than 7% in pre-market trading following the report.

AI Investment Portfolio Shows Divergent Fortunes

Microsoft's $3.2 billion gain from its Anthropic investment in Q4 was driven by a mark-to-market adjustment, according to TechCrunch. On a full-year basis, the OpenAI investment has generated a $5 billion gain, despite the quarterly markdown. The mixed results highlight the volatility of Microsoft's bet on competing AI labs. The company is now openly competing with both OpenAI and Anthropic, as noted by TechCrunch.

Looking ahead, Microsoft expects to maintain strong cash generation through fiscal 2027, even as it continues to invest heavily in AI infrastructure. The company's Azure business is now on a run rate exceeding $124 billion, according to analyst Jamin Ball. With commercial RPO at $678 billion, Microsoft has a substantial contracted revenue backlog that can fund future AI capex and capacity expansion.