• Microsoft shares gain about 1.8% in premarket trading, driven by strong earnings and AI adoption.
  • Azure cloud revenue grows 33%, exceeding estimates, while AI-related services contribute to accelerating growth.
  • Analysts point to robust enterprise demand and potential for further margin expansion.

Microsoft Corp. saw its shares climb nearly 2% in premarket trading on Thursday, extending gains after the software giant reported fiscal fourth-quarter results that beat expectations. The company posted revenue of $64.9 billion, up 15% year-over-year, with Azure cloud services leading the charge at 33% growth, above the 31% analysts had projected. “Our AI transformation is reshaping every layer of the tech stack,” said CEO Satya Nadella in a statement, highlighting the integration of Copilot across products.

Investors are betting that Microsoft’s heavy investment in artificial intelligence will continue to pay off. The company’s Intelligent Cloud segment generated $28.5 billion in revenue, with AI services accounting for 8 percentage points of Azure’s growth, up from 7% last quarter. “This is a clear signal that enterprise AI adoption is accelerating,” said a technology analyst at a major investment bank. Microsoft’s capital expenditures surged to $19 billion, up 78% from a year ago, as the company expands data center capacity to meet demand. “They’re spending heavily now, but the payoff is coming faster than many expected,” the analyst added.

Microsoft’s guidance also reassured investors. The company forecast current-quarter revenue of $63.8 billion to $64.8 billion, with Azure growth expected to remain in the 28% to 29% range. “The numbers are solid, and the narrative around AI monetization is getting stronger,” said a portfolio manager at a large asset manager. “We see this as a core holding in any tech portfolio.”

The broader tech rally lifted other megacap stocks, but Microsoft stood out due to its diversified revenue streams and strong execution. The company’s Productivity and Business Processes segment, which includes Office and LinkedIn, grew 11%, while More Personal Computing, including Windows and Xbox, rose 14%. “It’s rare to see a company of this size grow across all segments,” the portfolio manager noted.

Some caution remains, however. The stock trades at 35 times forward earnings, a premium to its historical average. “Valuation is a concern, but if AI delivers as expected, it’s justified,” the analyst said. “Investors are watching Azure growth and Copilot adoption closely.”

A spokesperson for Microsoft declined to comment beyond the earnings release. The company’s stock, up 22% this year, has added nearly $500 billion in market value since the start of 2024.

Correction: A previous version of this article misstated Azure growth for the prior quarter. It has been updated.