Microsoft reported an 18% year-over-year revenue increase to $90 billion for the quarter ending in June, surpassing the LSEG consensus estimate of $87.6 billion. Adjusted earnings per share rose 30% to $4.74, although it's unclear how this compares to the $4.24 consensus.
Azure cloud revenue growth was particularly strong, accelerating to 43%, exceeding both management's forecast and the FactSet consensus. This growth was aided by the addition of 31 new data centers, bringing the total to 88 for the year.
The company's commercial remaining performance obligation (RPO) increased by $51 billion, indicating a diversified customer base beyond just AI model developers, which alleviates investor concerns about over-reliance on a few clients.
Despite skepticism around its M365 Copilot AI tool, which has seen user growth from 15 million to over 30 million paid seats, Microsoft remains committed to its AI strategy. The company maintained its capital expenditure outlook for fiscal 2026, adjusting it slightly lower to $175 billion due to an accounting change, but still reflecting significant year-over-year growth.
Microsoft generated $19 billion in free cash flow, allowing for continued investment in AI and shareholder returns, including $3.4 billion in share repurchases. Looking ahead, management expects total revenue for fiscal Q1 to be between $89.85 billion and $90.95 billion, with Azure revenue growth projected at 45% in constant currency, above market expectations.
Overall, the results have rekindled investor interest in Microsoft, although challenges remain, particularly regarding the adoption of its AI tools