Microsoft Puts Up Awesome Fiscal Fourth Quarter Results

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By Brian Nelson, CFA

On July 30, Microsoft (MSFT) reported awesome fiscal fourth quarter results with both revenue and GAAP earnings per share exceeding the consensus forecast. Revenue of $76.4 billion increased 18% (up 17% in constant currency), better than consensus of $73.8 billion, while operating income increased 23% (up 22% in constant currency). Net income increased 24% (up 22% in constant currency), while diluted earnings per share was $3.65, up 24% and 22% in constant currency, and better than consensus of $3.38 per share.

Management had the following to say about the quarter:

Cloud and AI is the driving force of business transformation across every industry and sector. We’re innovating across the tech stack to help customers adapt and grow in this new era, and this year, Azure surpassed $75 billion in revenue, up 34 percent, driven by growth across all workloads.

We closed out the fiscal year with a strong quarter, highlighted by Microsoft Cloud revenue reaching $46.7 billion, up 27% (up 25% in constant currency) year-over-year.

In the quarter, revenue in its Productivity and Business Processes segment increased 16% (up 14% in constant currency. Revenue in its Intelligent Cloud segment advanced 26% (up 25% in constant currency) in the quarter thanks to Azure and other cloud services revenue growth of 39%. Revenue in its More Personal Computing segment increased 9% in the quarter thanks in part to search and news advertising revenue (excluding traffic acquisition costs) increasing 21% (up 20% in constant currency).

Microsoft returned $9.4 billion to shareholders in the form of dividends and share repurchases in the fourth quarter of fiscal 2025. The tech giant ended the quarter with $94.6 billion in cash and short-term investments versus $43.2 billion in short- and long-term debt. For the three months ended June 30, Microsoft generated $42.6 billion in net cash from operations, up from $37.2 billion in the same period a year ago, while capital spending totaled $17.1 billion, resulting in free cash flow in the fiscal fourth quarter of $25.6 billion.

Looking to fiscal 2026, Microsoft expects to deliver another year of double-digit revenue and operating income growth. Management noted that it “will continue to invest against the expansive opportunity ahead across both capital expenditures and operating expenses given (its) leadership position in commercial cloud, strong demand signals for (its) cloud and AI offerings, and significant contracted backlog.” Capital expenditures are expected to be over $30 billion in the first quarter of fiscal 2026. Microsoft is firing on all cylinders, and we continue to like the idea in the newsletter portfolios.

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