Microsoft reported strong fiscal fourth-quarter results, with revenue up 18% to $90 billion, exceeding analyst estimates of $87.62 billion. Its intelligent cloud segment revenue rose 31.6% to $39.31 billion, with Azure revenue growth accelerating to 43%, beating estimates of 39.98% to 40.2%. Earnings per share were $4.74, surpassing expectations of $4.24. The company's M365 Copilot paid seats reached over 30 million, exceeding analyst forecasts of 26.9 million. Microsoft's shares rose more than 8% in extended trading, as investors were reassured that its significant AI spending bets are paying off and its cloud business continues to grow, maintaining investor confidence in its market position despite high capital expenditures.
Microsoft's free cash flow for the fiscal 2026 fourth quarter was $19.6 billion, above analyst estimates of $13.44 billion, though down 23% from the previous year. Capital expenditures for the April-June quarter were $41 billion, a more than 70% increase from last year. However, investor concerns were eased by the strong revenue and cloud growth forecasts. Microsoft expects fiscal 2027 first-quarter sales with a midpoint of $90.4 billion, above estimates of $89.66 billion, and Azure growth of 45%, well above analyst estimates of 40.92%. The company also announced a change in accounting for data center leases, spreading long-term leases over 25 years instead of 15, which lowers reported annual capital expenditures. They forecast $50 billion for the fiscal first quarter of 2027, below analyst estimates of $56.02 billion.
In contrast, Meta Platforms experienced a significant financial setback, with its free cash flow plummeting by 91% to $784 million in the second quarter, down from $8.55 billion a year earlier. This dramatic drop is largely attributed to the substantial costs associated with its AI buildout and its metaverse bet, with the Reality Labs division having accumulated over $80 billion in operating losses. Despite beating revenue estimates with $60.80 billion, Meta missed adjusted earnings per share expectations at $6.18 compared to estimates of $7.13.
Meta also raised its full-year 2026 expense forecast to a range of $165 billion to $169 billion, from a prior forecast of $162 billion to $169 billion, and increased its capital expenditure guidance to $130 billion to $145 billion, from an earlier $125 billion to $145 billion. The company anticipates third-quarter revenue to be between $61 billion and $64 billion, aligning with estimates of $62.68 billion. Meta's shares dropped 10% in extended trading, reflecting investor concerns about the financial strain of its costly AI investments and the uncertain payoff.
