Microsoft held its $175 billion annual capital expenditure outlook steady while delivering stronger-than-expected Azure cloud growth, sending shares up 9% in after-hours trading Wednesday.

The software giant reported fiscal fourth-quarter revenue of $90 billion, up 18% year-over-year and beating analyst estimates of $87.6 billion. Azure cloud revenue grew 43% on a constant currency basis, ahead of the 40.3% consensus forecast.

The results mark a potential turning point for Microsoft, whose stock has dropped 24% over the past year amid concerns it was falling behind in the AI race. Critics argued the company relied too heavily on OpenAI and lacked innovation in its AI tools.

Capacity constraints ease as data center expansion accelerates

Microsoft added 31 new data centers across five continents during the quarter, bringing its 2026 total to 88. The faster-than-expected capacity rollout helped Azure exceed growth forecasts after previous quarters were constrained by infrastructure limitations.

The company's commercial remaining performance obligation increased by $51 billion sequentially, driven by customer commitments beyond frontier AI model developers. This broader customer base addresses investor concerns about hyperscalers becoming overly dependent on a handful of AI companies like OpenAI and Anthropic.

CFO Amy Hood guided Azure growth to accelerate further to 45% in constant currency for the first quarter of fiscal 2027, above Street expectations of 42%.

Copilot gains momentum despite skepticism

Microsoft's M365 Copilot now serves over 30 million paid seats, up from 20 million three months ago and 15 million six months prior. CEO Satya Nadella teased a Copilot "super app" launching later this quarter.

The company invested $41 billion in capital expenditures during the quarter, up 70% year-over-year but in line with analyst models. Unlike competitors, Microsoft maintained its spending outlook rather than raising guidance each quarter.

Microsoft generated $19 billion in free cash flow, contrasting with Alphabet's negative free cash flow and Meta's $1.7 billion. The company returned $3.4 billion to shareholders through share repurchases while continuing aggressive AI investments.

Management expects first-quarter fiscal 2027 revenue between $89.85 billion and $90.95 billion, with the $90.4 billion midpoint above consensus estimates of $89.7 billion.