Strong Earnings and AI Confidence Fuel Market Surge
Microsoft reached a major financial milestone on Thursday as its market capitalization surpassed $4 trillion, joining Nvidia as one of only two publicly traded companies to cross that threshold. The stock jumped more than 5% in early trading following its fiscal fourth-quarter earnings report, which exceeded Wall Street expectations.
The company posted adjusted earnings per share of $3.65 on revenue of $76.4 billion, surpassing analyst estimates of $3.37 EPS and $73.89 billion in revenue. This marked a significant increase from the $2.95 EPS and $64.72 billion revenue reported in the same quarter last year.
Cloud Revenue Continues to Drive Growth
Microsoft’s Intelligent Cloud segment brought in $29.8 billion, exceeding expectations and highlighting strong demand for Azure services. CEO Satya Nadella emphasized the role of cloud and AI in reshaping industries, noting that Azure alone surpassed $75 billion in revenue for the year, up 34% from the previous period.
“Cloud and AI is the driving force of business transformation across every industry,” Nadella stated, reinforcing the company’s long-term strategic focus on AI innovation across its entire tech stack.
Investors Look Ahead to AI’s Full Potential
Despite the current momentum, analysts believe Microsoft’s AI investments will truly reach a turning point in fiscal 2026. Wedbush analyst Dan Ives described fiscal year 2025 as a setup for a more transformative FY26, when broader AI deployments are expected across enterprise clients.
Bank of America’s Brad Sills highlighted Microsoft’s Copilot software as a potential catalyst for further growth, tapping into the company’s early lead in AI adoption through its strategic partnership with OpenAI.
OpenAI Partnership Faces Structural Tensions
While Microsoft maintains its AI leadership position through its collaboration with OpenAI, tensions have emerged over OpenAI’s move to restructure its for-profit entity into a public benefit corporation. The ongoing disagreement may impact Microsoft’s equity stake and could place future funding at risk, including a potential $20 billion investment linked to the agreement.
The outcome of these negotiations could influence Microsoft’s AI roadmap, though for now, investors remain focused on its immediate success in cloud services and generative AI applications.
