Shares of Microsoft extend gains to 7% after hours on capex guide
Microsoft shares are up 7% after hours with most of the gains coming in the past few minutes on the capex headlines, not the beat.
The numbers were good. Q4 adjusted EPS of $4.74 crushed the $4.24 estimate and revenue of $90.0 billion beat $87.6 billion expected. Full-year profit came in at $133.7 billion, up 31% — though note the quarter included a $0.27 EPS benefit, largely a $3.2 billion gain on the Anthropic investment plus lower-than-expected retirement program costs. Strip that out and it's still a clean beat.
The cloud numbers were the substance:
- Azure and other cloud services grew 43% in Q4 (MSFT's year ends in June), with Q1 guided to roughly 45% in constant currency and H1 FY27 expected to accelerate versus H2 FY26. Hyperscalers aren't supposed to accelerate at this scale. That's impressive stuff.
- Azure surpassed $100 billion in revenue for the first time this fiscal year; total cloud revenue for the year topped $214 billion.
- Nearly 90% of cloud revenue comes from customers outside frontier model companies — a direct answer to the circular-revenue critique.
- Contract backlog rose 25% in Q4 excluding OpenAI. They're pre-emptively taking that objection off the table too.
Then came the capex framing that moved the stock. Calendar 2026 capex will be approximately $175 billion and FY27 capex the same — enormous numbers — but the CFO stressed that spending plans are unchanged, with the higher figure reflecting a lease accounting reclassification. Q1 capex will top $50 billion. What's notable here is that the $175b number looks lower than $190b guided previously but it's actually the same given lease reclassifications. At least it's not yet another raise.
Critically, Microsoft expects to remain free cash flow positive in FY27.
That last line is the whole game right now. Meta reported the same night with free cash flow down 91% and an open-ended commitment to compute growth in 2028 and beyond, and got hit for 12%. Microsoft is spending on the same scale but paired it with demand that "continues to exceed available capacity," new capacity that was "quickly monetized" the moment it landed, and a promise the cash machine stays positive. Microsoft also already has a mature cloud business and has proven it can scale.
The reactions in these two companies are a clean A/B test.
One item deserves a skeptical eyebrow: effective at the start of FY27, Microsoft is extending the estimated useful life of its data centers and office buildings from 15 to 25 years. The CFO says it only affects the timing of depreciation with minimal benefit to FY27 operating income, and that's probably true — but stretching depreciation schedules on assets at the heart of a debate about how fast AI hardware becomes obsolete is a choice, and it flatters every margin comparison from here. Notably, they also disclosed roughly two-thirds of the quarter's capex went to short-lived assets, so the servers themselves aren't getting the 25-year treatment.
On a night the Dow fell 1,110 points and Meta got taken apart, a 7% rally is the market drawing a line down the middle of the AI trade, or maybe MSFT expectations were ultra-discounted.
This article was written by Adam Button at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
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