Microsoft Q4: Azure Tops $100 Billion, AI Bet Mostly Pays Off
Microsoft’s Azure just crossed $100 billion a year, and the AI bet mostly paid off.
Cloud Growth Accelerates
Microsoft’s cloud growth reaccelerated in the fourth quarter, with Azure up 43% and full-year Azure revenue passing $100 billion for the first time. The backlog jumped to $678 billion, and demand is broadening beyond AI labs. However, capital spending hit $35.8 billion in the quarter alone, and a one-off Anthropic gain influenced the profit line.
AI Spending: Good, But Not Great
The verdict on Microsoft’s AI spending? Good, but not great.
- Revenue: Rose 18% to $90 billion for the quarter to 30 June, and net income climbed 31% to $35.8 billion.
- Azure Performance: Azure and other cloud services grew 43% year on year, ahead of expectations.
- Backlog: Commercial backlog, at $678 billion, is not solely concentrated with OpenAI. Paid seats for its Microsoft 365 Copilot assistant reached 30 million.
- Costs: Capital spending reached about $116 billion for the full year, more than double the previous year.
- Profit Analysis: The profit jump includes a one-off gain from Anthropic; on adjusted measures, growth was 22%.
Takeaways
AI cloud demand is clearly real and broadening, but spending continues to rise, indicating that the build-out still needs substantial funding.