Microsoft awaits October results after quarterly capital spending hits $41 billion
Key Facts
Microsoft's capital expenditure reached $41 billion in the fourth quarter of its fiscal 2026, according to the company's earnings call, ahead of its next quarterly results in October. The company said the spending included the impact of higher component prices, as revenue continued to grow year on year. Fourth-quarter revenue totaled $90.0 billion, up 18% from the same period of the previous fiscal year, according to the earnings statement. Free cash flow for the quarter, meanwhile, stood at $19.6 billion, a figure management said reflected higher capital expenditure. The period's results thus combined revenue growth with the impact of spending on the company's remaining cash, two aspects Microsoft presented in its earnings statement and financial call.
In its cloud business, revenue from Azure and other cloud services rose 43% year on year in the fourth quarter of fiscal 2026, according to Microsoft. Growth in that business had reached 40% in the first quarter of the same fiscal year, putting the pace of expansion at year-end above its level at the start. In contracted business, the company ended the fiscal year with commercial remaining performance obligations of $678 billion. It said in its statement that these obligations rose 84% from the end of the previous fiscal year. The amount represents remaining contracted business, distinct from revenue the company had already generated during the quarter, while Azure's growth rate measures the change in cloud business revenue over the period.
Microsoft announced its first-quarter fiscal 2026 results on October 29, 2025, for the period ended September 30, 2025, according to its filing with the U.S. Securities and Exchange Commission. Revenue for that period totaled $77.7 billion, up 18% year on year, according to the company's statement. Reported earnings per share under generally accepted accounting principles were $3.72, exceeding expectations of $3.67, according to Reuters. On an adjusted basis, diluted earnings per share were $4.13 after excluding the impact of the company's investments in OpenAI. Both figures relate to the same fiscal period, with different accounting treatment of the impact of those investments. The earnings beat reported by Reuters therefore concerned reported earnings per share, while Microsoft also provided its adjusted measure in that quarter's results.
Capital expenditure in the first quarter of fiscal 2026 totaled $34.9 billion, according to Microsoft's earnings call for that period. Management attributed the scale of spending to expanding demand, saying it was "driven by growing demand for our cloud and AI offerings." In the preceding quarter, the fourth quarter of fiscal 2025, capital expenditure totaled $24.2 billion, according to the company's earnings call for that quarter. The previous period's amount included $6.5 billion in finance leases within the total spending announced by management. The increase in spending between the two periods coincided with the expansion in demand described by the company, before spending reached the higher level recorded at the end of the following fiscal year.
Against the backdrop of the demand announced at the time, OpenAI contracted to purchase an additional $250 billion in Azure services under the partnership agreement announced ahead of the first-quarter fiscal 2026 results. This commitment appeared in the partnership announcement Microsoft filed with the U.S. Securities and Exchange Commission as additional purchases of cloud services. Following the October 2025 earnings announcement, Microsoft shares fell about 4% in after-hours trading, according to Reuters' report on the announcement. In the next regular session, the shares closed down 2.9%, according to Reuters, a closing loss from a trading period subsequent to the initial decline. Microsoft has scheduled its next report for after the market closes on October 28, 2026, when it will release results for the first quarter of its fiscal 2027.