Microsoft's shares jumped as much as 10% in pre-market trading on Thursday after the company forecast stronger-than-expected revenue and accelerating growth at its Azure cloud business, providing fresh evidence that its heavy investment in artificial intelligence is yielding returns. The Redmond-based tech giant expects revenue between $89.85bn and $90.95bn for the July-September quarter, representing growth of 16% to 17%. Azure revenue is projected to grow by approximately 45% in constant currency, up from 43% in the quarter just ended.
For the fiscal fourth quarter ending in June, Microsoft reported revenue of $90bn, up 18% year-on-year and above the $87.6bn forecast by analysts surveyed by FactSet. Net profit climbed 31% to a record $35.8bn, though the figure was boosted by a $3.2bn unrealized gain on its investment in AI company Anthropic. Diluted earnings per share reached $4.81, surpassing analysts' expectations of $4.24.
Microsoft Cloud revenue totaled $59.3bn in the quarter, up 27% year-on-year, reflecting strong demand across Azure and the company's first-party AI applications and services. Azure and other cloud services revenue increased by 43%. Microsoft said demand for Azure continued to exceed available capacity, despite bringing additional computing infrastructure online during the quarter. For the full fiscal year, the company reported $331.8bn in revenue.
AI investments pay off
“This year, Azure revenue surpassed $100bn for the first time, and Microsoft 365 Copilot reached over 30 million paid seats, reflecting the confidence customers are placing in us to power their AI transformation,” Microsoft CEO Satya Nadella said in a statement. The concurrent growth in Azure and Copilot indicates that Microsoft is “winning on both fronts,” said Michael J. Wolf, founder and CEO of Activate Consulting, by “supplying the cloud infrastructure for enterprise AI while monetising the AI tools embedded in the products workers use every day.”
Investors had been looking for evidence that Azure and Copilot, Microsoft's flagship AI assistant, could eventually produce returns as concerns about high AI spending have grown across the industry. Chief financial officer Amy Hood told investors on a call that the company's capital expenditure plans for the 2026 calendar year remain unchanged. An accounting change will bring that guidance closer to approximately $175bn, but in practice, the expectations remain “unchanged.” This marks a break from competitors that have been steadily increasing their spending forecasts. Hood said earlier this year that the company expects to invest $190bn in capital expenditures in 2026.
Bryan Hayes, an investment strategist at Zacks Investment Research, said that “for the first time in three quarters, the market appears willing to grant that the spending is buying something real.” Danielle Criste, Microsoft's director of investor relations, added: “We remain very confident in the long-term return on these investments, given these strong demand signals, the increasing product usage we've seen and the efficiencies that we're driving across the platform.”
Meta disappoints as costs surge
In contrast, Meta Platforms reported a decline in second-quarter profit on Wednesday, even as revenue beat Wall Street's expectations. The Facebook and Instagram parent company earned $15.85bn in the April-June period, down 14% from $18.34bn a year earlier. Revenue grew 28% to $60.8bn from $47.52bn. Meta earned $6.18 per share, below the $7.19 expected by analysts surveyed by FactSet. Analysts had forecast revenue of $60.22bn.
Total costs and expenses jumped 55% to $42.03bn, including $2.4bn in charges related to legal proceedings and $1.18bn in severance expenses connected with Meta's May workforce reduction. Its operating margin narrowed to 31% from 43% a year earlier. “AI is accelerating our core business today, powering our next generation of products, and opening the door to entirely new enterprise opportunities,” said CEO Mark Zuckerberg in a statement. “The results are already showing, and I'm optimistic about the potential ahead.”
The contrasting results highlight the diverging fortunes of two tech giants as they navigate the AI boom. Microsoft's strong performance and optimistic outlook suggest that its early and massive investments in AI infrastructure are beginning to pay off, while Meta faces headwinds from restructuring costs and legal challenges. For European investors and tech watchers, the developments underscore the importance of AI as a key driver of growth, with implications for cloud services, enterprise software, and digital advertising markets across the continent.
