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Microsoft shares rise on Azure growth and AI efficiency updates
Microsoft forecast 45% Azure growth for the first quarter, while capital spending increased 35% to $13.87 billion and free cash flow fell 23%.
Microsoft’s stock has rebounded in 2026, rising 2% year-to-date and gaining 23.7% since late July, after the company reported fiscal fourth-quarter results that beat analysts on revenue and earnings.
The key driver was Azure, with revenue up 43% year over year, topping even optimistic estimates as investors focused on potential AI returns. Following the results, the shares jumped 15.5% on July 30, the day after the earnings report.
In the company’s August 17 discussion of the quarter, CEO Satya Nadella highlighted efficiency gains of up to 40% attributed to custom chips and external AI technologies. Microsoft also guided to 45% Azure growth for the first quarter, reinforcing bullish expectations around cloud and AI profitability.
The outlook is tempered by signs of cost pressure, as commercial bookings decelerated to 12% while capital expenditures rose 35% to $13.87 billion. That combination contributed to a 23% drop in free cash flow, raising concerns about margin compression.