ii view: Microsoft stock rallies 14% on growth prospects
Already with a foot in the door at companies across the globe but with the battle to host AI now running hot. Buy, sell, or hold?
30th July 2026 16:18
by Keith Bowman from interactive investor
Q4 results to 30 June
- Revenue up 18% to $90 billion (£67.5 billion) year-over-year
- Earnings per share (EPS) up 23% to $4.74
- Returned $10.2 billion to shareholders, unchanged from Q3
Chief Executive Satya Nadella said:
“This year, Azure revenue surpassed $100 billion for the first time, and Microsoft 365 Copilot reached over 30 million paid seats, reflecting the confidence customers are placing in us to power their AI transformation.”
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ii round-up:
Microsoft Corp (NASDAQ:MSFT) detailed sales that beat Wall Street forecasts, with the Windows software maker and provider of data centres offering confident forward sales estimates.
Data centre demand and sales of its AI Copilot services helped fuel fourth-quarter revenue of $90 billion (£67.5 billion), an 18% increase from Q4 a year ago. Analysts had forecast $86.7 billion.
Management now expects growth of 45% at its specialist cloud data Azure service during the current Q1 to late September. That’s up from forecast beating growth of 43% during Q4.
Shares in the Dow Jones and Nasdaq 100 company rose 8% in post results US trading having come into these latest numbers down by a fifth so far in 2026. Both the Dow and tech heavy Nasdaq have risen by around 7% during that time. High performance computer chip maker and AI play NVIDIA Corp (NASDAQ:NVDA) is up a modest 2% year-to-date.
Microsoft operates across the three areas of intelligent cloud, productivity and business processes including its Windows and Office software, as well as personal computing taking in products such as gaming and the X-box.
Sales at the wider intelligent cloud business and including Azure, rose by almost a third from a year ago to $39.3 billion.
Revenues for the Productivity and Business Processes division, including Windows and Office software, climbed 14% to $37.8 billion.
Sales at the Personal Computing division fell 10% to $12.9 billion, hindered by a 10% fall in Xbox gaming demand.
The so-called Magnificent Seven company kept its expectation for capital expenditure over the calendar year 2026 unchanged at $175 billion, but flagged an expected increase for the year ahead.
Microsoft returned $10.2 billion to shareholders during the period, unchanged from the prior quarter. Broker Morgan Stanley reiterated its ‘overweight’ stance on the shares post the update.
First-quarter results are likely to be announced late October or early November.
ii view:
Started in 1975 by Bill Gates and Paul Allen, Microsoft today employs over 220,000 people. Productivity and Business Processes generated most sales over this latest financial year at 42%. That was followed by Intelligent Cloud at 41% and Personal Computing the balance of 17%.
For investors, competition to host AI software on data centre servers for corporations is intense, with Google owner Alphabet, AWS owner Amazon.com Inc (NASDAQ:AMZN), International Business Machines Corp (NYSE:IBM) and Oracle Corp (NYSE:ORCL) all competing hard. The full impact of AI on Microsoft’s core Windows software is still difficult to predict. Success and returns on the company’s growing capital expenditure is not guaranteed, while supply constraints for items to build data centres were previously highlighted.
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More favourably, growth at the core Azure cloud data business is expected to accelerate with capital expenditure, at least for now, remaining unchanged. Microsoft’s domination of corporate software via Windows and Office gives it an ongoing foot in the corporate door to sell other services such as cloud and security provision. Product and geographical diversity exist, while shareholder returns persist via share buybacks and a modest dividend yield of 1%.
For now, and despite continuing risks, existing corporate software dominance and consensus analyst fair value estimate above $550 per share appear to give grounds for optimism.
Positives:
- Windows operating system holds a dominant market position
- Growing cloud business
Negatives:
- Uncertain economic outlook
- Political concern remains regarding the size and power of tech companies
The average rating of stock market analysts:
Buy
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