Microsoft surges as Azure momentum and stronger guidance revive AI optimism
Microsoft shares are extending their post-earnings rally after the company delivered fiscal fourth-quarter revenue of $90.0 billion, up 18% year over year, while adjusted earnings reached $4.74 per share. Microsoft Cloud revenue climbed 27% to $59.3 billion, and Azure growth accelerated to 43%, reinforcing the view that enterprise AI demand is translating into measurable cloud revenue rather than remaining a purely investment-driven narrative.
The quality of the report also helped restore confidence after months of concern over heavy infrastructure spending. Azure surpassed $100 billion in annual revenue, Microsoft 365 Copilot exceeded 30 million paid seats, and commercial remaining performance obligations rose to $678 billion. These figures suggest that demand visibility remains strong, even though AI infrastructure continues to pressure gross margins and free cash flow.
Guidance supports the breakout
Management expects first-quarter revenue of $89.85 billion to $90.95 billion, representing growth of 16% to 17%. Azure revenue is projected to rise about 45% in constant currency, while customer demand continues to exceed available capacity. Microsoft also maintained its calendar 2026 capital expenditure expectations at approximately $175 billion after accounting changes, confirming that the company remains committed to expanding AI capacity despite investor sensitivity to spending levels.
The daily chart reflects this reassessment. Microsoft has broken sharply above the $450-$460 resistance area and reclaimed the 200-day moving average, with the latest advance carrying the stock toward $490. The move improves the medium-term structure, although the near-vertical rally leaves the shares vulnerable to profit taking. A pullback toward $460-$450 could attract renewed demand, while a sustained break above $490 would expose the psychological $500 level.
Fed and Middle East risks remain valuation headwinds
The broader macro environment is less supportive. The Federal Reserve kept its target range at 3.50%-3.75%, but three policymakers favored a rate increase as inflation remained above target and energy-related price pressures persisted. Higher bond yields could still limit valuation expansion across large-cap technology stocks, particularly after such a rapid post-earnings repricing.
The Middle East conflict also remains relevant through energy prices, supply-chain uncertainty and Microsoft’s regional cloud operations. For now, as written in Microsoft jumps after blockbuster earnings as AI demand accelerates, earnings momentum is outweighing these risks, but renewed geopolitical escalation or another rise in long-term yields could trigger a broader round of profit taking. The bullish outlook has improved materially, although confirmation above $490-$500 is still needed before the recovery can be treated as a fully established uptrend.
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