NEW YORK, July 26, 2026, 11:28 EDT — U.S. markets were shut for Sunday.
- Microsoft ended Friday at $381.70, little changed for the session. The stock declined 3.1% compared to the previous Friday.
- Microsoft is set to release its fiscal fourth-quarter results on Wednesday, July 29. Analysts project earnings per share to reach $4.24.
- Initial guidance from the company projects quarterly capital expenditures exceeding $40 billion. Revenue is anticipated to range between $86.7 billion and $87.8 billion.
Microsoft heads into earnings week following a 3.1% drop across five sessions. The focus has shifted from the existence of Azure demand to whether that demand is sufficient to exceed infrastructure expenses.
If the company holds to its declared minimum capex, quarterly capital expenditures would climb by at least 25.4% from the previous quarter. In comparison, revenue at the midpoint of guidance would grow by just 5.2%. Outlays would therefore accelerate at nearly five times the rate of revenue.
More than 45.8% of quarterly revenue would be used for capex. The figure stood at 38.5% in fiscal Q3, compared with 31.7% in the same period last year.
| Period | Revenue | Capex, including leases | Capex/revenue | Azure growth |
|---|---|---|---|---|
| FY2025 Q4 actual | $76.4 billion | $24.2 billion | 31.7% | 39% reported |
| FY2026 Q3 actual | $82.9 billion | $31.9 billion | 38.5% | 39% constant currency |
| FY2026 Q4 preliminary outlook | $87.25 billion midpoint | Above $40 billion | Above 45.8% | 39%-40% constant currency |
The table displays reported revenue and capital expenditure figures, factoring in finance leases. The Q4 row is marked as preliminary since management indicated that spending would surpass $40 billion.
The arithmetic moves Wednesday’s test to focus on cash conversion. Azure might achieve guidance, but that may not address investor worries over returns.
The market sent a cautionary signal on Friday. The Nasdaq dropped 0.64%, closing the week down 2%. Concerns over increasing AI investment led investors to pull back from technology stocks.
“The fear of missing out is turning into a concern about significant overbuilding,” said Peter Andersen, chief executive at Andersen Capital Management. Reuters
Alphabet NASDAQ:GOOGL provided an example. Revenue from Google Cloud surged 82% to $24.8 billion. However, Alphabet increased its 2026 capital expenditure forecast to a range of $195 billion-$205 billion and reported a free cash flow burn of $5.9 billion. Its stock declined roughly 3% following the update.
Microsoft’s top-line earnings expectation remains steady. Analysts’ consensus is at $4.24, the same as a month earlier. Three months prior, it was $4.27.
Key demand signals remain strong. In Q3, Azure recorded 39% growth at constant currency. Microsoft 365 Copilot exceeded 20 million paid users, and annualised AI revenue surpassed $37 billion.
Microsoft CFO Amy Hood expressed confidence in the company’s anticipated investment returns, pointing to increasing product usage and higher demand signals.
Microsoft projected Azure revenue to increase by 39%-40% in constant currency for Q4. The company noted that demand continued to surpass available supply. Microsoft anticipates these capacity limitations will remain until at least December.
New business from customers backs up that perspective. On Thursday, Databricks announced it would extend its partnership with Azure into the 2030s. The company will also increase its use of Microsoft’s Cobalt processors.
The report comes after the Federal Reserve’s decision on Wednesday. By late Friday, futures reflected a 38% probability of a quarter-point rate hike. Rising rates would reduce the present value of AI investments with long horizons for investors.
Risks: Microsoft shares could face pressure if Azure growth falls short of 39%, capital expenditures are significantly higher than $40 billion, or Copilot uptake slows. An unexpected Fed hike would also increase valuation risk, while quicker capacity deployment may benefit the stock.
The response to earnings could depend less on surpassing quarterly profit forecasts. Factors such as fiscal 2027 expenditure, Azure’s exit rate, and free-cash-flow guidance are likely to be more significant.
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