Shares of Microsoft Corp. gained more than 9% in extended trading today after the company delivered solid earnings and revenue that came in above expectations.

The after-hours increase lifted the company’s market capitalization above the $4 trillion milestone, trailing in the wake of Nvidia Corp., which passed that pinnacle earlier this month.

The company reported fourth-quarter earnings before certain costs such as stock compensation of $3.65 per share, easily beating the $3.37-per-share analyst target. Revenue for the period rose 18%, to $76.44 billion, surpassing Wall Street’s consensus estimate of $73.81 billion.

All told, Microsoft posted net income of $27.2 billion, up from $22.03 billion in the year ago period.

For the first time, Microsoft also disclosed the value of its Azure cloud computing business in dollars. It said the unit delivered more than $75 billion in revenue in fiscal 2025, up 34% from a year ago.

The Azure cloud business is a part of Microsoft’s Intelligent Cloud division, which generated $29.88 billion in revenue in the previous quarter, up 26% from a year ago and above the Street’s target of $28.92 billion. Revenue from Azure grew 34% during that period, though Microsoft didn’t break out quarterly sales figures.

Microsoft Chief Financial Officer Amy Hood also offered strong guidance for the company’s next quarter, saying she expects revenue of between $74.7 billion and $75.8 billion. The middle of that range came in ahead of Wall Street’s forecast of $74.09 billion. In addition, Hood said the company sees Azure revenue growing by around 37%, ahead of the analyst’s consensus of 33.7%. The forecast implies an operating margin of 46.6%, which is also wider than the analyst’s 45.7% estimate.

According to Hood, Microsoft will spend more than $30 billion in capital expenditures during the first quarter, which suggests growth of around 50% compared to the same period last year. She told analysts on a conference call that the company’s capex will continue to grow in fiscal 2026, but not as fast as it did in the previous year. One reason for the ongoing expenditure is that Microsoft continues to struggle to meet the data center capacity demands of its customers, given sky-high interest in artificial intelligence models.

“In January I said I thought we’d be in a better supply-demand shape by June,” Hood told analysts on the call. “And now I’m saying I hope I’m in a better place by December.”

Elsewhere in Microsoft’s business, the Productivity and Business Process segment, which accounts for the Office software suite and LinkedIn, generated $33.11 billion in sales during the quarter, surpassing the Street’s $32.12 billion estimate.

Microsoft Chief Executive Satya Nadella (pictured) talked about how the company’s AI bet, including its sizable investment in OpenAI and billions of dollars’ worth of Nvidia chips, is helping to boost software sales in this unit. He said the integration of Microsoft 365 Copilot with its productivity tools has resulted in a noticeably higher revenue per user for products such as Office. In total, there are now more than 100 million monthly active users of Copilot tools, including the Microsoft 365 Copilot for commercial customers and the Copilot consumer assistant in Windows.

Valoir analyst Rebecca Wettemann told SiliconANGLE that Nadella’s comments are encouraging, but said the company is still perceived to be struggling with a lack of traction in comparison with some of its rivals.

“Microsoft has been slower to get AI traction than some competitors,” the analyst said. “As competitors start to trot out enterprise references and talk about adoption numbers, Microsoft will need to follow suit to battle perceptions that Copilot is still too expensive for broad adoption by its customers.”

Nonetheless, Wettemann believes today’s results show that Microsoft’s data center infrastructure investments are paying off, even if its own AI offerings are a question mark. “But with that said, we’ll still be looking for guidance on how much it continues to spend moving forward, as well as how it will navigate the OpenAI partnership moving forward,” she added.

Meanwhile, the More Personal Computing unit, which includes Windows, devices, search advertising and video games revenue, saw sales hit $13.45 billion in the prior quarter, up 9% from a year ago and above the Street’s target of $12.68 billion. Sales of Windows operating licenses and devices increased 3% during the quarter, but investors may have been slightly disappointed to hear that number, considering Gartner Inc. recently estimated that PC shipments rose 4.4% over the same period.

During the quarter, Microsoft’s capex rose 2% from a year ago, to $24.2 billion, as it continues to race to build out its data center infrastructure for AI customers. A further $1.71 billion was spent on other expenses in the quarter, including losses on equity method investments such as OpenAI.

Holger Mueller of Constellation Research Inc. said Microsoft’s three main businesses are all moving at different speeds, with intelligent cloud revenue growing impressively at 30%, productivity and business processes rising satisfactorily at around 20%, and more personal computing, somewhat disappointingly, falling just shy of 10%.

“It’s making progress in some areas better than others, but in any case it’s translating this revenue growth into profit very well,” the analyst said. “At the same time, it has managed to control its expenses, with R&D up 10%, sales and marketing up just 5% and general and administrative costs being reduced. That adds up to strong profit momentum, and investors will be keen to see Microsoft build on this in future quarters.”

It has not all been good news at Microsoft, though. Earlier this month, the company revealed that it’s going to lay off about 9,000 employees, or 4% of its total workforce, with most of the cuts coming in its video game division. Those layoffs are a result of changes in the way the company distributes its popular Xbox games console in Europe. In addition to Microsoft’s core Xbox team, the cuts also impacted a number of game development studios operated by the company.

As of today’s market close, Microsoft’s stock had gained 22% in the year to date, comparing well with the broader S&P 500 Index, which is up just 8% in the same period.

Image: Microsoft/livestream