Microsoft shares set for best day in nearly 18 years as Azure surge validates AI bet

Microsoft shares set for best day in nearly 18 years as Azure surge validates AI bet

Thu, July 30, 2026 at 7:49 PM GMT+3 3 min read

• MSFT +3.02%

Microsoft Corp (NASDAQ:MSFT) shares surged almost 17% on Thursday morning, putting the stock on track for its best single-day performance in nearly 18 years.

Investors and analysts alike cheered earnings showed accelerating Azure growth and a sharp inflection in Copilot adoption.

The company reported fourth-quarter revenue of $90.01 billion and earnings per share of $4.74, both ahead of expectations. Azure revenue rose 43% year-over-year, beating consensus of roughly 40%, while paid Copilot seats climbed past 30 million after net additions more than doubled sequentially.

Management guided to Azure growth of about 45% for the first quarter of fiscal 2027, well above the Street's roughly 41% estimate.

Analysts at Bank of America called the results "increasing validation of Microsoft's AI strategy," noting revenue grew 17% in constant currency against a Street forecast of 14.8%.

Remaining performance obligations rose $51 billion quarter-over-quarter to $678 billion, with BofA noting all of that growth came from customers outside the frontier-model cohort, a sign of broadening AI demand. The firm said about 30% of RPO is expected to convert to revenue over the next 12 months, up from 25% last quarter, with existing RPO covering 57% of Street revenue estimates for the next year and 88% over the following 15 months.

Jefferies called it "a slam dunk," pointing to Azure's best beat in three quarters, doubled Copilot net adds and an accelerating Microsoft 365 business, and contrasted the quarter with Meta Platforms, which it said is still building toward visible AI returns without similar cloud deal momentum.

Microsoft 365 Commercial Cloud grew 14% in constant currency and is guided to 15% next quarter, with further acceleration expected through fiscal 2027. Commercial RPO was up 84% year-over-year.

Jefferies flagged that AI demand still exceeds supply despite Microsoft adding another gigawatt of data center capacity in the quarter, and said fiscal 2027 operating margin compression should be less than a percentage point, better than feared.

Kathleen Brooks, research director at XTB, said Microsoft's results were "more warmly received" than other big tech reports this season, pointing to a $3.2 billion return on its Anthropic investment and lower-than-expected early retirement programme costs that helped preserve profitability.

Brooks noted Azure cloud revenue topped $100 billion for fiscal 2026 for the first time, making it larger than Google Cloud, with $40 billion generated in the quarter alone.

Capital expenditure reached $41 billion, up more than 60% year-over-year, which BofA called in line with expectations, adding that fiscal 2026 capex guidance was unchanged after adjusting for a lease accounting change.

Free cash flow fell 23% to $19.64 billion, a figure Brooks said the market can absorb far more comfortably than Meta's.

Microsoft returned $10.2 billion to shareholders in the quarter, including $6.8 billion in dividends and $3.4 billion in buybacks.