MSX US Stock Daily Observation: Microsoft FY2026 Q4 Cloud Business Fully Exceeds Expectations, Azure Growth Rate Hits 43% Surpassing $100 Billion Record
- Key Insights: Microsoft's latest earnings report shows revenue, profit, and Azure cloud service growth all exceeded expectations. However, capital expenditures are accelerating, and GAAP net profit was inflated by one-time gains from AI equity investments, making it higher than adjusted figures. The sustainability of profit margin growth requires attention.
- Key Elements:
- Q2 revenue reached $90 billion, up 18% year-over-year, surpassing the expected $87.723 billion; adjusted EPS was $4.74, beating the expected $4.25.
- Azure cloud services grew 43% year-over-year, significantly exceeding the roughly 40% estimate, with annual revenue surpassing $100 billion for the first time.
- GAAP EPS was $4.81, higher than the adjusted EPS, primarily due to one-time net gains from AI equity investments like OpenAI, not core operational growth.
- Next quarter's Azure growth guidance is 45%, far exceeding the consensus estimate of 41.4%, but capital expenditure guidance is over $50 billion and still accelerating.
- Remaining Performance Obligations (RPO) surged 84% year-over-year, and Copilot paid seats exceeded 30 million, signaling strong demand.
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Today's Watch
Microsoft's quarterly revenue, profit, and cloud growth all exceeded expectations. Revenue reached $90 billion, up 18% year-over-year. Azure grew 43%, significantly beating the ~40% estimate, and surpassed $100 billion in annual revenue for the first time. Interestingly, this quarter's GAAP EPS ($4.81) was higher than adjusted EPS ($4.74). The main reason was a one-time net gain from AI equity investments like OpenAI, reversing the drag from massive losses in previous quarters. Furthermore, next quarter's guidance was also strong: Azure growth guidance of 45% far exceeded the consensus estimate of 41.4%, though capital expenditures continue to accelerate.
Data in a Minute
• Revenue: $90.007 billion, +18% YoY, beating the $87.723 billion estimate
• Adjusted EPS: $4.74, beating the $4.25 estimate; GAAP EPS: $4.81 was higher due to a one-time gain from AI equity investments
• Azure: +43% YoY, beating the ~40% estimate, surpassing $100 billion in annual revenue for the first time
• RPO (Remaining Performance Obligations): +84% YoY; Copilot paid seats exceeded 30 million
• Operating Income: $40.6 billion, +18% YoY, with a margin of approximately 45%
• Next Quarter Guidance: Azure growth of 45% (beating the 41.4% estimate); capital expenditures exceeding $50 billion
MSX View
In Microsoft's quarterly report, one key detail is GAAP surpassing non-GAAP. This represents a one-time benefit from AI equity investments and is unrelated to core operations. What truly matters remains the solid growth of non-GAAP EPS and operating income (+18%). Setting that aside, Azure guidance significantly exceeded expectations, RPO surged by 84%, and Copilot surpassed 30 million users, signaling strong demand. The only concern is that capital expenditures continue to accelerate and depreciation periods are being lengthened. It remains to be seen how much of the reported profit margin is genuine operating leverage and how much is accounting embellishment, a point worthy of continued observation.
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