Microsoft beat on the top and bottom lines and saw a gain from its Anthropic stake. The company issued healthy quarterly guidance, with more strength coming from Azure. Capital spending plans for 2026 are unchanged, although there will be more in the new fiscal year. Microsoft should remain cash-flow positive in the 2027 fiscal year, executive Amy Hood said. In this article Microsoft shares moved 8% higher in extended trading on Wednesday after the software maker disclosed strong fiscal fourth-quarter results and called for steady 2026 capital expenditures. Here's how the company did relative to LSEG consensus: Earnings per share: $4.74 adjusted vs. $4.24 expected Revenue: $90.01 billion vs. $87.62 billion expected Microsoft's revenue grew about 18% year over year in the quarter, which ended on June 30, according to a statement . Net income of $35.77 billion, or $4.81 per share, increased from $27.23 billion, or $3.65 per share, in the same quarter a year ago. Microsoft cited a $3.2 billion gain from its investment in artificial intelligence lab Anthropic and lower-than-expected costs tied to its first-ever voluntary retirement program . Meanwhile, its Xbox gaming business received an impairment charge. As of Wednesday's close, the software maker's shares have given up 19% so far in 2026, while the S&P 500 index has gained about 7%. Investors have squeezed longstanding software stocks this year, acting on fears of disruption from generative artificial intelligence models. Meanwhile, Microsoft is confronting "some concentration risk" with its OpenAI relationship, especially with the ascent of open-source models, Deutsche Bank analysts, who recommend buying Microsoft stock, said in a note last week. Microsoft said in January that around 45% of its $625 billion in commercial remaining performance obligations were tied to OpenAI. When it comes to allocating computing capacity, CEO Satya Nadella has been trying to balance the needs of the Azure cloud, research and applications such as the Microsoft 365 Copilot assistant. If researchers get ahold of more AI chips for model training, that means fewer will be available for cloud clients. The company said commercial remaining performance obligations, a measure of unearned revenue and unrecognized revenue, increased 8% to $678 billion from the previous quarter . Sequential growth was driven by commitments from clients other than AI model developers, Microsoft said. Capital expenditures and finance leases for the quarter, at $41 billion, jumped 69%. Microsoft's finance chief, Amy Hood, reiterated plans for 2026 capital spending. But she said it will lengthen the useful life of office and data center buildings to 25 years from 15. And more future data center leases will appear as operating leases instead of finance leases, she said. The adjustment will lead to roughly $175 billion in capital expenditures and finance leases, Hood said. For the 2027 fiscal year, Hood said she sees further growth in capital expenditures, pointing to "demand signals across our portfolio."

Free cash flow, at $19.64 billion, plummeted 23%. Hood said she expects Microsoft to be positive free cash flow in the 2027 fiscal year. Microsoft's forecast includes $89.85 to $90.95 billion in fiscal first-quarter revenue, which would be up 16% at the middle of the range. Analysts surveyed by LSEG were looking for $89.66 billion. The Intelligent Cloud segment featuring Azure posted $39.31 billion in revenue, up 31.6% year over year and more than the $38.16 billion consensus among analysts polled by StreetAccount. Azure growth accelerated to 43%, or 43% at constant currency, compared with 40% in the prior quarter. Analysts polled by CNBC and StreetAccount had been looking for 40% and 40.2% Azure growth at constant currency. Microsoft said Azure revenue in the 2026 fiscal year exceeded $100 billion for the first time, up 41%. At that size, the business trails Amazon Web Services while remaining larger than Alphabet's Google Cloud. Hood projected 45% Azure growth at constant currency for the fiscal first quarter, above StreetAccount's 41.4% consensus. The Productivity and Business Processes segment, which includes Office, Dynamics and LinkedIn, produced $37.85 billion in revenue, up 14.3% and above the $37.19 billion StreetAccount consensus. The company pointed to over 30 million paid seats for the Microsoft 365 Copilot work assistant. There were more than 20 million as of April. Hundreds of enterprise customers have purchased millions of seats for high-end E7 productivity software bundles, Nadella said on a conference call with analysts. He said the GitHub Copilot coding assistant now has 50 million users. Read more CNBC tech news Apple event live updates: First foldable iPhone, new watch series expected as Ternus makes debut Andreessen- and Thiel-backed defense startup opens U.S. missile factory as it exits stealth Anthropic researcher says AI has more than 10% chance of 'killing all humans' after colleague quits How one hedge-fund manager built his firm to be powered entirely by AI agents Microsoft's More Personal Computing segment, containing Bing, Surface, Windows and Xbox, contributed $12.85 billion in revenue, which was down 4.4% and higher than StreetAccount's $12.17 billion consensus. The company said sales of devices and Windows licenses to device makers were down 7%. Technology industry researcher Gartner estimated that PC shipments declined 4.2%. Xbox revenue declined 10%. Earlier this month the unit's CEO, Asha Sharma, announced job cuts and said four studios would spin out. During the fiscal fourth quarter, Microsoft introduced a cost-efficient AI coding model , picked LinkedIn executive Dan Shapero to take over the business social network and lowered Xbox Game Pass subscription prices. WATCH: Markets have decided Microsoft Azure is 'not a very exciting business', says Gabelli's John Belton