Microsoft shows how to make money on data centers. AI investments are starting to pay off

While Meta's results sparked market anxiety regarding the profitability of AI investments, deepening declines in Nasdaq contracts, in Redmond, at Microsoft's headquarters, the company's leadership can certainly pop the champagne. The world's largest software company, though now perhaps more of a cloud company, Microsoft, published its financial report for the fourth quarter of the 2026 fiscal year, proving that giant expenditures on data centers can go hand in hand with a powerful beat of analyst expectations across all key levels.

Investor reaction was immediate. In post-market trading, the company's shares rose by over 3% to 5%, at one point approaching the $410 per share barrier. Although the company's shares may have already hit bottom around $350 per share, they still potentially remain about 1/3 of the way to historical highs near $550 per share.

Q4 FY2026 Results: A true show of strength in every segment

Unlike its rivals, Microsoft did not have to explain margin pressure or unexpected costs, and the numbers speak for themselves:

• Total revenue: $90.01 billion (18% y/y growth) compared to the market consensus of $87.6–$87.72 billion.
• Earnings per share (EPS): $4.81 (adjusted EPS: $4.74), which quite significantly beat market expectations in the range of $4.24–$4.25.
• Operating profit: $40.60 billion compared to the $39.02 billion expected by the market.
• Net profit: $35.8 billion for the quarter alone.
• Total cloud revenue (Microsoft Cloud): $59.3 billion compared to estimates of $58.71 billion.
• Intelligent Cloud segment: $39.31 billion against expectations of $38.17 billion.
• Productivity and Business Processes segment: $37.85 billion compared to a consensus of $37.27 billion.
• More Personal Computing segment: $12.85 billion compared to the expected $12.17 billion.

After a one-time jump in profit in the previous quarter, the company presented itself very well, exceeding a profit of nearly $32 billion. Source: Bloomberg Finance LP, XTB

Where does the success lie? Record Azure and Copilot on the move

Wall Street was most concerned about a slowdown in the flagship Azure cloud. Meanwhile, Microsoft showed that the demand for AI computing power under its wing is growing faster than predicted:

• Thunderous Azure growth of 43%: Revenue from Azure and other cloud services (excluding currency fluctuations) jumped as much as 43% y/y, beating average analyst estimates (+39.6%).
• Magical Azure milestone: For the first time in history, annual revenue from cloud service sales for Azure exceeded the $100 billion mark.
• Copilot gains mass adoption: The number of paid subscriptions for the flagship AI assistant, Microsoft 365 Copilot, exceeded 30 million. This shows that it's not necessarily the best solution that counts, but the key is the sales model. It is also clear proof for skeptics that corporations are paying hard cash for generative AI implementations.

CapEx at $41 billion: Spending that pays dividends

Investor fears about burning cash on servers and chips did not bypass Microsoft; however, in this case, the company defended its strategy with concrete business results:

• Capital expenditures (CapEx) jumped 70%: investment spending in Q4 alone reached an astronomical amount for the company of $41 billion (70% y/y increase), reflecting the massive expansion of data centers for artificial intelligence needs.
• Profit from investment in Anthropic: Financial results in this quarter were further bolstered by $3.2 billion in profit recorded from its stake in the AI startup Anthropic.
• Difference from Meta: While Meta lost investor confidence due to a drop in operating margin and a lack of clear monetization of new infrastructure outside its own advertising business, Microsoft proved that cloud expansion immediately generates new, high-margin commercial revenue.

Microsoft shows how to turn tokens into hard currency

Microsoft CEO Satya Nadella summarized the quarter by stating that the company is pushing the boundaries of cost efficiency so that "every customer can turn AI tokens into real business results."

This report is a clear signal to the market: investors are not afraid of massive AI CapEx as long as it is accompanied by 43 percent cloud growth and beating earnings per share by several dozen cents. Microsoft successfully proves that in the race for the commercialization of artificial intelligence, it remains the undeniable leader of the pack.

MSFT has failed to break above $400 in the past 3 sessions, which might happen at the start of tomorrow's session. However, it should be noted that market sentiment looks dismal, which is illustrated by the decline in Nasdaq 100 contracts. Source: xStation5