Microsoft's Azure grew 43% in fiscal Q4 2026 as AI capex hit $41 billion
In brief
- Azure and other cloud services revenue grew 43% year over year, up from 40% the prior quarter.
- Full-year Azure revenue topped $100 billion for the first time, up 41%.
- Q4 capital spending reached about $41 billion; Microsoft Cloud gross margin fell to 65% from 68%.
- Microsoft forecast 45% constant-currency Azure growth for Q1 of fiscal 2027.
The headline numbers
Full-year Azure revenue passed $100 billion for the first time, up 41% year over year. That's a first for the business. Microsoft Cloud (the broader bucket that includes Azure and commercial cloud products) brought in $59.3 billion in the quarter, up 27%, while GAAP net income came in at $35.8 billion, a 31% jump from the prior year.
Copilot is part of the picture too. Microsoft 365 Copilot, the company's AI assistant built into Word, Excel, Outlook and other Office apps, passed 30 million paid seats by the end of the quarter.
The cost side
The growth isn't cheap.
Fourth-quarter capital expenditures were approximately $41 billion, and full fiscal-year additions to property and equipment reached $115.9 billion (up 80% year over year). Microsoft added 31 data centers in the fourth quarter alone and 88 across fiscal 2026. That spending shows up in the margins: Microsoft Cloud gross margin fell to 65% in the quarter, down from 68% in the prior quarter, as the company spent heavily on AI infrastructure.
Demand, capacity and the forecast
In earlier quarters, Microsoft faced capacity constraints. Customer demand ran ahead of the infrastructure it had available to serve it. Crypto Briefing's analysis said the fourth-quarter results suggest that earlier spending is now turning into faster revenue growth as new capacity comes online. It's the publication's reading of the numbers, not a statement from Microsoft.
The contracted pipeline is large, though. Commercial remaining performance obligations rose to $678 billion, up 84% year over year, per the same report.
Microsoft has also guided higher for the next period. The company projected Azure growth of 45% in constant currency for the first quarter of fiscal 2027, which would be another step up from the 43% it just posted. It's a forecast, and Microsoft hasn't reported that quarter yet.
