Microsoft Smashes Q4 Estimates as Azure Soars 39%, Shares Jump on AI‑Fueled Cloud Surge

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Microsoft (MSFT) delivered a blowout fiscal fourth-quarter 2025 report after the close Wednesday, firmly outpacing Wall Street’s expectations and sending shares up more than 7% in after-hours trading. The results reinforced Microsoft’s position as the hyperscaler leader in the AI era, as robust Azure growth and strong enterprise adoption outweighed concerns about ballooning capital expenditures. Investors had braced for high spending tied to artificial intelligence infrastructure, but management’s execution across cloud and productivity segments helped calm those fears — at least for now.

At the core of investor focus heading into the release was whether Azure could maintain mid-30% growth, how Microsoft would frame its $80 billion fiscal 2025 CapEx outlook, and whether the company’s partnership with OpenAI would remain a competitive moat amid growing pressure from Google Cloud. Wednesday’s numbers showed Microsoft exceeding even the loftiest expectations, particularly in Azure, which surged 39% in constant currency versus consensus estimates closer to 34%.

Expectations vs. Results

Heading into the print, analysts expected EPS of $3.35, up 14.5% year-over-year, on revenue of $73.86 billion (+14% YoY). Azure growth was guided at 34–35%, with investors informally targeting 36% as the “bogey.” Microsoft Cloud was expected to continue its Q3 momentum, while CapEx guidance remained anchored at $80 billion for FY25.

Microsoft handily beat those marks. EPS came in at $3.65, a 24% increase from last year and $0.30 ahead of consensus. Revenue hit $76.4 billion, up 18% year-over-year and $2.6 billion above expectations. Cloud was the undisputed engine: Intelligent Cloud revenue rose 26% to $29.9 billion, while Microsoft Cloud overall reached $46.7 billion (+27% YoY). Azure alone delivered 39% constant currency growth — a clear acceleration from Q3’s 33%.

CapEx was a key focus, and Microsoft raised its full-year FY25 forecast by $10 billion to $85 billion, citing surging demand for AI infrastructure.

Segment Breakdown

Productivity and Business Processes revenue grew 16% to $33.1 billion, powered by Microsoft 365 Commercial cloud (+18%) and Dynamics 365 (+23%). LinkedIn, while still positive, showed slower growth at 9%, signaling some maturity in that business line.

More Personal Computing, often seen as Microsoft’s most cyclical division, posted a solid 9% gain to $13.5 billion. Growth was driven by Search and news advertising (+21%) and Xbox content and services (+13%), offsetting only modest Windows OEM and Devices revenue (+3%).

Margins remained strong despite heavy investment. Operating income hit $34.3 billion, up 23% year-over-year, with operating margins near 46%. Net income rose 24% to $27.2 billion, underscoring Microsoft’s ability to scale profits even amid aggressive CapEx.

Major Drivers in Focus

Azure & AI: The star of the show was Azure’s 39% growth, far surpassing the 34–35% guided range and reinforcing Microsoft’s leadership in enterprise cloud adoption. Satya Nadella noted that Azure has now surpassed $75 billion in annual revenue, up 34%, with strength “across all workloads.”

CapEx Trajectory: The $10 billion bump to FY25 CapEx was a headline takeaway. While it underscores confidence in future demand, it also raises questions about free cash flow sustainability. Microsoft returned $9.4 billion to shareholders in dividends and buybacks this quarter, but the tension between CapEx and cash returns will remain a focal point into FY26.

OpenAI Partnership: Management did not disclose new details on revenue sharing but emphasized that AI adoption across Microsoft 365 and Azure workloads is accelerating. Analysts will parse commentary closely given Google’s recent partnership with OpenAI on GCP.

Productivity & Copilot: Copilot adoption remains a core growth lever. Microsoft 365 Copilot penetration is expected to expand from 17% of endpoints in Q4 to 31% within a year, fueling subscription growth. GitHub Copilot usage quadrupled year-over-year, underscoring developer engagement.

Security & Risk: Powell’s hack-related scrutiny aside, Microsoft faces continued regulatory and cybersecurity headwinds.

Context from Q3

For comparison, Q3 delivered $70.1 billion in revenue (+13% YoY) and EPS of $3.46 (+18% YoY). Azure grew 33% in constant currency, accelerating from Q2’s 31%. Microsoft Cloud revenue was $42.4 billion (+20%), while Copilot adoption tripled year-over-year. At that time, operating margins were already near 46%, setting the stage for Q4’s even stronger print.

The sequential jump from Q3 to Q4 — particularly Azure accelerating from 33% to 39% — shows Microsoft not only sustaining but expanding momentum into the back half of the fiscal year.

Market Reaction & What’s Next

Despite a strong beat, equity markets initially showed muted reaction during the Fed press conference earlier in the day, only to rally sharply after Microsoft’s release. Shares jumped more than 7% in after-hours trading, as the combination of revenue, EPS, and Azure beats outweighed concerns over swelling CapEx.

Still, investors remain cautious about how long Microsoft can sustain growth rates above 35% in Azure while funding massive data center buildouts. Guidance updates on the call could swing sentiment further.

Looking ahead, markets will pivot quickly to Friday’s jobs report and Thursday’s PCE release, both of which Fed Chair Jerome Powell highlighted as critical to the September Fed decision. CME Fed funds futures now price a 53% chance of a September cut, down from 61% before Powell’s remarks — underscoring how sensitive markets remain to both monetary policy and corporate earnings.

Bottom Line

Microsoft delivered a quarter that exceeded even elevated expectations, with Azure’s 39% surge and strong cloud momentum reinforcing its leadership in the AI-driven hyperscaler race. While CapEx remains a growing burden, the company’s ability to expand revenue, margins, and shareholder returns in tandem reassures investors. For now, Microsoft is proving it can balance massive investment with profitability, keeping it firmly at the center of the AI era.