Microsoft Shares Surge as Cloud Growth Exceeds Expectations
Microsoft's shares surged over 8% in after-hours trading as the tech giant reported stronger-than-expected cloud growth and issued an upbeat outlook for its fiscal first quarter.
The company forecast revenue of about $90.4 billion, surpassing analysts' expectations of $89.66 billion. Azure cloud revenue grew 45% on a constant currency basis, outpacing market estimates of 40.92%. The tech giant's total revenue rose 18% to $90 billion for the quarter ended June 30, with earnings per share (excluding OpenAI investments) coming in at $4.74, beating estimates of $4.24.
Chef executive Satya Nadella said Microsoft is increasingly designing its own AI models and chips alongside using third-party technologies, allowing customers greater flexibility to choose AI tools based on cost and performance. The company's M365 Copilot paid seats exceeded 30 million during the quarter, up from 20 million previously and ahead of analysts' expectations of 26.9 million.
The cloud contracted backlog stood at $678 billion, reflecting continued demand for Microsoft's AI and cloud services. The revised accounting treatment for long-term data centre leases extended their useful life from 15 years to 25 years, lowering capital expenditure forecast to $50 billion for the first quarter of fiscal 2027, below analysts' estimate of $56.02 billion.