Microsoft shares rise as Azure growth beats forecasts despite cash-flow squeeze

NEW YORK, July 29, 2026, 17:01 EDT — U.S. regular trading was closed, while extended trading remained active.

Microsoft NASDAQ:MSFT shares rose about 3% in extended trading Wednesday. Azure revenue grew 43%, beating the 39.98% Visible Alpha consensus.

The result eased the market’s main concern. Microsoft spent $41 billion on capital projects. That was over 70% above last year, but below the $42.37 billion estimate.

The shares entered the report down about 18% this year. Investors needed evidence that AI demand was catching the infrastructure buildout.

Metric	Microsoft result	Street estimate	Difference
Revenue	$90.0 billion	$87.7 billion	2.6% above
Azure revenue growth	43.0%	39.98%	3.0 percentage points above
Diluted EPS, excluding OpenAI impact	$4.74	$4.24	11.8% above
Capital expenditure	$41.0 billion	$42.37 billion	3.2% below
Microsoft 365 Copilot paid seats	More than 30 million	26.9 million	At least 11.5% above

Street figures are consensus estimates reported by Reuters and the Financial Times. Provider methodologies can differ. Microsoft’s quarterly results are unaudited.

The first read was favorable: faster cloud growth and lower-than-feared spending. The cash-flow picture was weaker.

Operating cash flow rose 30% to $55.4 billion. Cash additions to property and equipment more than doubled to $35.8 billion.

Free cash flow fell 23% to $19.6 billion, based on those figures. It was $25.6 billion a year earlier.

The income statement held up better. Operating margin edged to 45.1% from 44.9%, despite the infrastructure surge.

That split matters. Capital spending drains cash immediately, while depreciation reaches earnings over time.

Demand indicators remained strong. Commercial cloud backlog rose $51 billion sequentially to $678 billion, an 8.1% increase.

Reuters said all sequential backlog gains came from customers outside leading U.S. AI model makers. That broadens demand beyond a few large AI laboratories.

Copilot adoption also accelerated. Paid seats exceeded 30 million, up from 20 million last quarter. Analysts had expected 26.9 million.

“Azure revenue surpassed $100 billion for the first time,” Chief Executive Satya Nadella said. Total Microsoft Cloud revenue rose 27% to $59.3 billion. Microsoft

The rest of the portfolio was mixed. Intelligent Cloud revenue jumped 32%, while More Personal Computing fell 4%. Windows and devices dropped 7%; Xbox content and services fell 10%.

GAAP earnings reached $4.81 per share. A $3.2 billion Anthropic investment gain added 33 cents. Microsoft said several discrete items produced a net 27-cent benefit.

Risks: Microsoft expects capacity constraints through at least year-end 2026. Continued cash-flow pressure could revive doubts about AI returns as depreciation rises.

Microsoft had not issued fiscal 2027 guidance by 17:01 EDT. Its analyst call was scheduled for 17:30 EDT. Capex and Azure guidance are the next test.

TS2 TECH • EXTENDED COVERAGE

Further analysis

Editorial insight

Where is Microsoft stock trading after today’s earnings?

MSFT closed July 29 at $390.54, down 0.71% during regular trading. Shares traded around $403 by 4:45 p.m. Eastern, up 3.19%. That after-hours move added roughly $93 billion to Microsoft’s market value. Options had priced a larger 6.6% move before the report. The Wall Street Journal

Did Microsoft beat Wall Street’s expectations?

Published consensus figures vary meaningfully across major market-data providers today. FactSet-based reports used $87.6 billion revenue and $4.24 adjusted EPS. Another earnings tracker used $89.37 billion revenue and $4.33 adjusted EPS. Microsoft reported $90.0 billion of revenue and $4.74 adjusted EPS. It therefore beat both published benchmark sets by comfortable margins. MarketWatch

Was the profit beat entirely operational?

The headline profit beat was not entirely operational. A $3.2 billion Anthropic gain and lower retirement costs supported earnings. Microsoft estimated discrete items added $0.27 per share versus prior guidance. Its $4.74 non-GAAP EPS excludes OpenAI effects, not Anthropic gains. Revenue and operating income still increased 18%, confirming broad business strength. Microsoft

Is Azure growth strong enough to support the AI thesis?

Azure revenue grew 43%, compared with roughly 40% expected by analysts. Intelligent Cloud revenue reached $39.3 billion, rising 32% year over year. Azure’s annual revenue exceeded $100 billion for the first time. Commercial remaining performance obligations reached $678 billion, increasing 84%. Capacity constraints through 2026 could still limit recognized cloud revenue. Microsoft

Is Microsoft 365 Copilot adoption finally material?

Microsoft 365 Copilot exceeded 30 million paid seats this quarter. That total rose from 20 million during the previous quarter. Analysts had expected roughly 26.9 million paid Copilot seats. At $30 monthly, 30 million seats imply $10.8 billion annually. Actual revenue should be lower because discounts, bundles, and timing matter. Microsoft still does not disclose Copilot revenue as a separate line. Reuters

Is AI spending becoming a cash-flow problem?

Quarterly capital expenditures reached $41 billion, rising more than 70% annually. Fiscal-year operating cash flow totaled $182.9 billion, increasing about 34%. Property additions consumed $115.9 billion during that same fiscal year. That leaves a simple free-cash-flow proxy near $67.0 billion annually. The comparable prior-year proxy was approximately $71.6 billion. The main risk is weak investment returns, not near-term solvency. Reuters

Is MSFT cheap after the selloff?

At roughly $403, MSFT trades near 22.5 times FY2026 GAAP EPS. Using adjusted EPS, the comparable multiple is about 23.3 times. Shares remain roughly 27% below their $555.45 52-week high. That valuation looks reasonable only if Azure sustains near-40% growth. Weak FY2027 guidance could quickly compress Microsoft’s earnings multiple. Microsoft

What is the near-term MSFT price forecast?

Options implied a 6.6% move around the earnings event. That translated into roughly $365 to $416 around Wednesday’s close. Early after-hours trading near $403 sits inside the range’s upper half. A data-based base case for Thursday is approximately $397 to $410. Clean guidance could lift shares toward $416 to $425. A spending shock could reverse shares toward $380 to $390. The guidance call was scheduled for 5:30 p.m. Eastern, so uncertainty remains. Reuters

What do analyst targets say for twelve months?

FactSet’s current average target is $553.34, alongside a $550 median. The published twelve-month analyst range stretches from $400 to $870. The average implies roughly 37% upside from the $403 after-hours price. Current ratings include 52 buys, nine overweights, and three holds. Because results arrived after Wednesday’s close, most listed targets likely predate them. That forecast spread remains unusually wide. The Wall Street Journal

How much does the broader market matter today?

The S&P 500 fell 1.52% to 7,316.15 during Wednesday’s session. The Nasdaq Composite dropped 1.74% and closed at 24,442.94. Microsoft’s regular-session decline was smaller, measuring only 0.71% before earnings. That relative strength is encouraging, but not decisive. Continued index weakness could still limit Thursday’s post-earnings follow-through. AP News

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Roman Perkowski is a senior markets reporter at TS2.tech, specializing in stocks, technology and macroeconomic trends. A graduate of the Cracow University of Economics, he previously worked in investment research and corporate finance. His coverage helps readers understand the key forces driving global financial markets and emerging industries. Follow Roman Perkowski on Google News.