NEW YORK, August 1, 2026, 16:05 EDT
- Microsoft finished trading on Friday at $464.72, taking its gain for the week to 21.7%.
- Commercial backlog grew by $51 billion quarter-on-quarter, exceeding the $41 billion spent on capital expenditures in the quarter.
- Azure’s revenue climbed 43%. Executives forecasted growth of roughly 45% in constant currency for this quarter.
U.S. cash markets were shut Saturday, as Microsoft halted a two-day surge in earnings. Shares rose 3.0% on Friday, after climbing 15.5% on Thursday. The company’s market capitalization closed around $3.46 trillion.
The investment argument is now based on secured demand. Commercial remaining performance obligation climbed to $678 billion, up from $627 billion. The $51 billion rise outpaced quarterly capital expenditures by $10 billion.
The ratio stood at 1.24 times. Microsoft reported that sequential growth in backlog was entirely from customers other than top AI model creators. When excluding OpenAI, the metric increased 25% from a year earlier.
Microsoft posted stronger weekly performance compared to the leading benchmarks, based on its closing prices from July 24 to July 31.
| Asset | Friday move | Weekly move |
|---|---|---|
| Microsoft | up 3.0% | up 21.7% |
| S&P 500 | up 0.7% | up 1.0% |
| Nasdaq Composite | up 1.0% | up 1.6% |
The rally on Thursday boosted market value by almost $450 billion, marking a record high. No fewer than nine brokerages lifted their price targets, with the average now at $560.90. Zacks’ Brian Mulberry stated the “key drivers of growth came from the cloud and AI divisions.” Reuters
The quarter delivered a number of highlights. Revenue increased by 18% to $90.0 billion. Adjusted earnings were $4.74 per share. Azure’s growth outpaced analyst consensus by 3.02 percentage points.
Microsoft offered a first-quarter forecast that surpassed Wall Street expectations. The differences listed below are based on published consensus estimates.
| Metric | Microsoft actual or guide | Street consensus | Difference |
|---|---|---|---|
| Q4 adjusted EPS | $4.74 | $4.24 | +$0.50 |
| Q4 Azure growth | 43.00% | 39.98% | +3.02 points |
| Q1 revenue midpoint | $90.40 billion | $89.66 billion | +$0.74 billion |
| Q1 Azure growth guide, constant currency | 45.00% | 40.92% | +4.08 points |
| Q4 free cash flow | $19.60 billion | $13.44 billion | +$6.16 billion |
| Q4 capital spending | $41.00 billion | $42.37 billion | -$1.37 billion |
Strong cash flow supported the outlays. Operating cash flow totaled $55.4 billion, enough to finance purchases of property and equipment 1.55 times over. Free cash flow topped consensus by 45.8%, even though it declined 23% compared to the previous year.
Microsoft’s figures help illustrate the relationship between demand, cash flow, and expansion efforts.
| Measure | Reported value | Calculated comparison |
|---|---|---|
| Quarterly gain in commercial backlog | $51.0 billion | 1.24 times reported capex |
| Net cash generated by operations | $55.4 billion | 1.55 times cash property spending |
| Available cash after expenses | $19.6 billion | 21.8% of revenue |
| Capital expenditure reported | $41.0 billion | 45.6% of revenue |
Backlog does not represent cash. It carries a weighted average duration of 2.3 years. Approximately 30%, equating to nearly $203 billion, is expected to turn into revenue over the next 12 months.
The trade received further backing from cloud sector peers. Amazon.com, Inc. NASDAQ:AMZN delivered AWS growth of 37% on Thursday. The previous week, Alphabet Inc. NASDAQ:GOOGL recorded a rise of 82% in Google Cloud revenue.
| Cloud platform | Latest reported growth | Friday stock move |
|---|---|---|
| Microsoft Azure | 43% | up 3.0% |
| Amazon AWS | 37% | rose 15.3% |
| Alphabet Google Cloud | 82% | gained 6.7% |
The growth rates cannot be directly compared as the companies report on varying products and revenue bases. Nonetheless, all three recorded strong demand for rented AI computing power.
Microsoft expanded its first-party revenue outlook as well. Microsoft 365 Copilot reached 30 million paid seats, up from 20 million in the previous quarter. Analysts had forecast 26.9 million. Satya Nadella stated that annual Azure revenue exceeded $100 billion for the first time.
Spending on construction stays strong. Capital expenditures in the first quarter are projected to surpass $50 billion. Leadership anticipates an increase in fiscal 2027 capex as well. Demand from customers still outpaces the current Azure capacity.
Microsoft increased its expected datacenter lifespan to 25 years, up from 15. This adjustment moves more leases beyond the company’s reported capital expenditures. Microsoft stated that its core investment strategy remains the same.
Next week brings key updates from the semiconductor sector and economic data. Advanced Micro Devices, Inc. NASDAQ:AMD will release its earnings after Tuesday’s market close. The July employment report is due Friday at 8:30 a.m. EDT.
| Date | Catalyst | Microsoft read-through |
|---|---|---|
| August 4 | AMD Q2 earnings | AI chip demand and supply |
| August 7 | U.S. July jobs data | Impact on Treasury yields and tech stock values |
Risks: Microsoft reported $329.1 billion in datacenter lease commitments that have not started. The company’s cloud gross margin declined due to higher infrastructure spending and increased usage. A slowdown in backlog conversion could weigh on liquidity as capital expenditures are set to rise in fiscal 2027.
The stock is now up against a tougher hurdle. Backlog and cash flow need to match construction progress, as they did in June.
Related articles: NASDAQ:MSFT
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