Azure crosses $100B in annual revenue as Microsoft stock surges

Microsoft ↘ 3.04% has become the first hyperscaler to convert its massive AI infrastructure spending into a $100 billion annual cloud revenue run rate, a milestone that sent shares surging roughly 18% and reframed the debate over whether Big Tech's AI bets are paying off.

The company reported fiscal fourth-quarter revenue of $90.01 billion, up 18% year over year, with earnings per share of $4.74 — both clearing Wall Street estimates of $87.62 billion and $4.24, respectively. Azure grew 43% in the quarter, pushing the cloud platform past $100 billion in annual revenue for fiscal 2026. Net income rose 31% to $35.8 billion.foreignpolicyjournal+3

AI Spending Meets Revenue Reality

The results land at a moment when investors have grown anxious about the returns on hundreds of billions in AI capital expenditure across the industry. Microsoft spent $175 billion in capex during fiscal 2026, yet still generated $19.6 billion in free cash flow in the final quarter — a feat its peers could not match. Alphabet ↘ 0.61% posted negative free cash flow of $5.86 billion in the same period and suspended buybacks, while Meta Platforms ↘ 3.54% saw its free cash flow drop 91%.247wallst+2

CEO Satya Nadella noted that AI demand continues to outpace supply, and Microsoft 365 Copilot has surpassed 30 million paid seats, with deployments anchored by clients including NHS England and EY. Management guided Azure growth to approximately 45% in constant currency for the first quarter of fiscal 2027, with plans to spend more than $50 billion on AI infrastructure in the current quarter alone.foreignpolicyjournal+3

Wall Street Raises Targets

Wells Fargo analyst Michael Turrin lifted his price target on August 12 from $650 to $700 — the highest on the Street — while maintaining an Overweight rating. J.P. Morgan's Samik Chatterjee followed on August 16 with a raise to $625, estimating that Copilot alone could generate an additional $24 billion to $41 billion in revenue. Analyst sentiment sits at 95% bullish.ad-hoc-news+1

Discount Valuation Persists

Despite the rally, Microsoft's trailing price-to-earnings ratio of 28 remains below the technology sector average of 35. The stock has gained roughly 21% over the past 30 days but pulled back modestly on Monday amid broader AI valuation jitters. The company's remaining performance obligations — a measure of contracted future revenue — surged 84% to $678 billion, offering visibility into income well beyond the current quarter.aol+4