Microsoft’s AI economics shift as Azure grows 43% in fiscal Q4 2026

Microsoft’s cloud business accelerated in the quarter ended June 30, 2026. Azure and other cloud services grew 43% year over year, up from 40% the quarter before.

Microsoft reported the results on July 29, 2026.

The numbers behind the acceleration

Full-year Azure revenue topped $100 billion for the first time, up 41% year over year.

Total company revenue for the fourth quarter reached $90 billion, an 18% increase. Microsoft Cloud, the broader bucket that includes Azure and commercial cloud products, brought in $59.3 billion, up 27%.

GAAP net income came in at $35.8 billion, a 31% jump from the prior year.

The spending side of the ledger

Capital expenditures in the fourth quarter hit approximately $41 billion. For the full fiscal year, additions to property and equipment reached $115.9 billion, up 80% year over year.

Microsoft added 31 data centers during the fourth quarter alone and 88 across fiscal 2026.

Microsoft Cloud gross margin fell to 65% in the fourth quarter, down from 68% in the prior quarter, as the company poured money into AI infrastructure.

Demand that hasn’t shown up on the income statement yet

Commercial remaining performance obligations rose to $678 billion, up 84% year over year.

Microsoft 365 Copilot passed 30 million paid seats by the end of the quarter. Copilot is the company’s AI assistant layered into Word, Excel, Outlook, and the rest of the Office suite.

Background: the AI return-on-investment debate

Microsoft’s earlier quarters featured capacity constraints, meaning it had more customer demand than infrastructure to serve it. The fourth-quarter results suggest that earlier spending is now converting into accelerated revenue as new capacity goes live.

The company’s partnership with OpenAI remains central to that picture, giving Azure a high-profile anchor tenant for AI workloads.

Microsoft projects Azure growth of 45% in constant currency for the first quarter of fiscal 2027.