Microsoft delivered a stronger than expected fiscal fourth quarter, easing investor concerns that rising AI investment would weigh on profitability. Revenue climbed to $90 billion, while earnings per share reached $4.81, both comfortably ahead of Wall Street estimates.
Azure revenue accelerated to 43% growth, Microsoft Cloud generated $59.3 billion in quarterly revenue, and Microsoft 365 Copilot surpassed 30 million paid users, reinforcing the view that AI investments are translating into commercial demand.
Perhaps most importantly, management did not increase its AI capital expenditure outlook, leaving investors relieved after Alphabet's recent decision to raise spending plans. The combination of accelerating cloud growth and stable investment guidance triggered a strong rally in after-hours trading, with Microsoft shares gaining roughly 9% in the premarket.
Macro backdrop remains supportive despite geopolitical uncertainty
Yesterday's Federal Reserve decision to leave interest rates unchanged removed one source of uncertainty for technology stocks. Although Chair Kevin Warsh maintained a cautious, data dependent approach and acknowledged that inflation risks have not disappeared, investors interpreted the meeting as supportive for growth companies since it did not signal an immediate policy tightening.
Meanwhile, the conflict in the Middle East continues to support demand for defensive assets and creates inflation risks through higher energy prices. So far, however, Microsoft's enterprise software, cloud and AI businesses have shown little sensitivity to geopolitical developments, with customer demand remaining resilient across industries.
Strong rally faces an important technical test
The technical picture has improved significantly following the earnings release. The chart shows Microsoft rebounding after successfully defending support around $390, while the strong premarket move points to an opening well above recent resistance. If those gains are maintained during regular trading, the breakout would strengthen bullish momentum and shift attention toward the $430 to $440 area.
At the same time, investors should not ignore the risk of profit taking after such a sharp advance. If buyers fail to hold the post-earnings breakout or lose momentum above the recent highs, the probability of a broader correction would increase as short-term traders lock in gains. Initial support is now seen near $410, followed by $400, while a break below those levels could expose the stock to $390 once again. Even so, the longer-term outlook, as I noted in Microsoft stabilizes as AI demand offsets macro headwinds, remains constructive as accelerating Azure growth continues to demonstrate that Microsoft's AI investments are generating tangible financial returns.
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