Azure revenue climbs 43% as 69 of 72 analysts keep buy ratings on the stock
Microsoft Corp. shares rose 37.5 percent between July and September, the stock's strongest quarterly showing since 1998 and a run that added US$1tn to the company's market capitalization
The technology-heavy Nasdaq 100 Index gained 0.4 percent over the same three months, leaving Microsoft the fifth-best performer in the US benchmark, Bloomberg reported.
The company reported revenue of US$90bn for the quarter ended June 30, up 18 percent, in results released July 29.
Microsoft Cloud revenue reached US$59.3bn, up 27 percent.
Azure and other cloud services revenue increased 43 percent, commercial remaining performance obligation rose 84 percent to US$678bn, and diluted earnings per share came in at US$4.81, up 32 percent on a GAAP basis.
In the earnings release, Satya Nadella, chairman and chief executive officer of Microsoft, said Azure revenue "surpassed US$100bnfor the first time" this year.
Microsoft 365 Copilot reached more than 30m paid seats, he said.
Shares jumped 16 percent the following session, the stock's best day since October 2008, adding US$450bn in market value, according to Bloomberg.
Chad Morganlander, senior portfolio manager at Washington Crossing Advisors and a long-time holder of the stock, told Bloomberg that Microsoft now explains more clearly how it will earn revenue from its capital spending.
He said the company also describes how customers benefit, after earlier messaging that was unclear.
Additions to property and equipment reached US$115.9bn in fiscal 2026, up from US$64.6bn in fiscal 2025, the earnings release shows.
Of the four largest AI spenders, which also include Alphabet Inc., Amazon.com Inc. and Meta Platforms Inc., Microsoft is the only one that has not seen free cash flow turn negative on an annual basis, Bloomberg reported.
Microsoft shows a route to profitability from AI, Morganlander told the news site. He said the company is spending without posting losses.
June was the stock's worst month since 2000, with investors questioning Microsoft's spending and the outlook for software companies in an AI world, per Bloomberg.
Of the 72 analysts tracked by Bloomberg who follow Microsoft, only three do not have buy ratings, and none rates the stock a sell.
The average price target implies a gain of about 11 percent over the coming 12 months.
Stifel upgraded the stock to buy, with analyst Brad Reback writing that the company had "clearly turned the corner" and that he is "increasingly comfortable with the company's ability to sustain mid/upper teens revenue growth."
The shares trade at almost 25 times earnings estimated over the next 12 months, a discount to their 10-year average of 27.
Among the largest US technology stocks, only Apple Inc. carries a higher multiple.
The quarterly surge lifted Microsoft into positive territory for the year at 6.1 percent, trailing the Nasdaq 100's 20 percent advance.
JoAnne Feeney, portfolio manager at Advisors Capital Management, which owns Microsoft shares, told Bloomberg that the stock rose this quarter because "people made a mistake." She said much of the rally is "the reversal of that mistake."
