Microsoft may be making AI work — finally boosting its share price

Microsoft posted better than expected results from its cloud and AI business, news that helped boost its languishing share price.

Recent earnings statements from major AI players have spooked investors thanks to already heavy capital expenditure being increased further. Last week, Google's shares fell despite record growth and this week Meta saw a similar fall amid concerns about AI spending. By contrast, Microsoft plans to keep its capex spending the same as previously forecast, holding it at $175bn for 2026.

Across the company’s revenue for the quarter was $90 billion, up by 18%, with net income totalling $35.8 billion, climbing by 31%. Revenue from Microsoft cloud was $59.3 billion, up by 27%, with better than expected results at its Azure cloud computing division, which posted revenue growth of 43% for the quarter, above estimates below 40%.

That lifted Microsoft's shares by 8%, rallying after a tough stretch this year that saw it fall more than 18%.

"This year, Azure revenue surpassed $100 billion 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," CEO Satya Nadell said in a statement. The company also reported a $3.2 billion return on its Anthropic investment.

Positive results on AI that are keeping pace with spending are likely what's behind the share price bump, noted Emarketer analyst Gadjo Sevilla. He said the capex figure is likely the most watched line in results right now – and this time that sparked optimism rather than concern.

"Microsoft spent $35.80 billion on property and equipment during fiscal Q4, more than double the $17.08 billion in the year ago quarter, bringing full-year capital expenditures to $115.95 billion – up nearly 80% from $64.55 billion in fiscal 2025," said Sevilla. "Despite that spending pace, the company still generated $55.44 billion in quarterly operating cash flow, up 30% YoY, a positive sign the AI buildout isn't cannibalizing the core business."

Sevilla added: "The company’s diversification strategy, its data center and AI partnerships, and its reliance on its own homegrown AI expansion will continue to stoke confidence to partners and investors while signaling to the rest of the industry how diversifying infrastructure and AI products strikes a balance for growth."

A better way to offer AI?

Alongside that, Microsoft CEO Satya Nadella said the company continues to shift away from a previous focus on OpenAI's models to building its own, saying the aim is to enable customers to pick and choose the best model to meet their needs.

"That's really the enterprise design architecture that we are going to evangelize. We ourselves are using it," Nadella said, according to Reuters, adding that the company's own models are 40% more efficient.

That's a key point amid concerns about the cost of using AI, with Microsoft earlier this week unveiling its own security model that it pitches as half the cost of rival systems.

Not all analysts were convinced, however. Forrester principal analyst Tracy Woo said that the Copilot adoption and strong revenue were good signs that AI investment was paying off "but the results stop short of fully validating the company’s AI strategy”.

"The new partnership with Anthropic helps reduce dependence on OpenAI, yet roughly 45% of commercial RPO [Remaining Performance Obligation] remains tied to that single model provider," she said.

Woo added: "While more AI products are scaling into enterprise‑grade workloads, the unresolved question is whether Microsoft’s infrastructure expansion can ultimately outrun the margin pressure that comes with supporting frontier‑model demand."