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Microsoft Q4 2026 Earnings Analysis · Beta Finch - Microsoft - MSFT - EN

• 0:08
  Speaker 1: Welcome to Beta Finch, your AI powered earnings breakdown.
• 0:12
  Speaker 2: I'm Alex and I'm Jordan. Today we're digging into Microsoft's
• 0:17
  Speaker 2: fiscal fourth quarter and full year fiscal year twenty twenty
• 0:21
  Speaker 2: six numbers.
• 0:22
  Speaker 1: Before we get into it, this podcast is AI generated
• 0:26
  Speaker 1: content for educational and entertainment purposes only. Nothing we discuss
• 0:31
  Speaker 1: should be considered investment advice. Always do your own research
• 0:35
  Speaker 1: and consult a qualified financial advisor before making any investment decisions.
• 0:40
  Speaker 2: Solid disclaimer out of the way. Let's talk numbers, because
• 0:43
  Speaker 2: this was a genuinely strong quarter for Microsoft Big picture.
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  Speaker 1: First full fiscal year revenue crossed three hundred and thirty
• 0:52
  Speaker 1: one billion dollars, up eighteen percent, and that growth actually
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  Speaker 1: accelerated through the year. Microsoft Cloud alone did over two
• 0:59
  Speaker 1: hundred fourteen billion dollars, up twenty seven percent, and Azure
• 1:03
  Speaker 1: crossed the one hundred billion dollar mark up forty one percent.
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  Speaker 2: For the year and for the quarter itself, revenue was
• 1:11
  Speaker 2: ninety billion dollars, up eighteen percent. EPs came in at
• 1:16
  Speaker 2: four dollars and seventy four cents, up twenty three percent
• 1:19
  Speaker 2: when you adjust for the open AI investment impact. There
• 1:23
  Speaker 2: were some one time items too, a three point two
• 1:26
  Speaker 2: billion dollar gain from their anthropic investment, some savings from
• 1:29
  Speaker 2: a voluntary retirement program, offset partly by Xbox severance and
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  Speaker 2: impairment charges.
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  Speaker 1: Azure was really the headline. Growth hit forty three percent
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  Speaker 1: this quarter, and cfo Amy had said they expect it
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  Speaker 1: to accelerate into the mid forties next quarter. That's remarkable
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  Speaker 1: for a business already this large.
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  Speaker 2: Right, and what stood out to me is why it accelerated.
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  Speaker 2: It wasn't just demand, which is still outstripping supply by
• 1:55
  Speaker 2: the way. It was efficiency. They shaved doc to livetime
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  Speaker 2: for new gus by nearly fifty percent over the year,
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  Speaker 2: and any capacity they free up gets monetized almost immediately
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  Speaker 2: because demand is so far ahead of supply.
• 2:10
  Speaker 1: That supply demand gap is clearly the story of this
• 2:13
  Speaker 1: whole AI infrastructure build out. They added thirty one new
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  Speaker 1: data centers this quarter alone, eighty eight for the year,
• 2:20
  Speaker 1: and they're on track to roughly double total capacity in
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  Speaker 1: just two years.
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  Speaker 2: Which explains the kpex number forty one billion dollars this quarter,
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  Speaker 2: and guidance for next fiscal year points to over one
• 2:32
  Speaker 2: hundred and seventy five billion dollars, partly due to an
• 2:35
  Speaker 2: accounting change where more data center leases shift from finance
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  Speaker 2: leases to operating leases. That's not new spending, just a reclassification,
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  Speaker 2: but it's worth knowing so you don't misread the KPEX jump.
• 2:48
  Speaker 1: Let's talk Copilot because the seat growth was eye catching.
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  Speaker 1: Over thirty million paid Microsoft three sixty five Copilot seats
• 2:56
  Speaker 1: and net seat adds more than doubled quarter over quarter.
• 3:00
  Speaker 2: What I found more interesting than the seat count was
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  Speaker 2: the usage data conversations per user nearly doubled year over year.
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  Speaker 2: In time for deployment to high usage across a customer's
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  Speaker 2: workforce dropped from months to just days. Satia and Nadella
• 3:14
  Speaker 2: also mentioned the number of customers with fifty thousand plus
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  Speaker 2: seats grew over seven x year over year. NHS England
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  Speaker 2: alone is rolling Copilot out to over five hundred thousand
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  Speaker 2: clinicians in staff.
• 3:27
  Speaker 1: And they're clearly trying to move the business model beyond
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  Speaker 1: simple perceipt pricing. The newly seven suite bundles Copilot E five,
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  Speaker 1: Entra and Agent three sixty five together and they're layering
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  Speaker 1: and usage based billing on top of seats. Same playbook
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  Speaker 1: they used with gethub Copilot, where consumption revenue jumped after
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  Speaker 1: a June pricing change, and copilot revenue accelerated over sixty
• 3:50
  Speaker 1: percent quarter over quarter.
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  Speaker 2: That model choice strategy came up a lot in the
• 3:55
  Speaker 2: Q and A two. An analyst asked Satia directly about
• 3:59
  Speaker 2: open and cut to models, potentially cutting in a Microsoft's
• 4:02
  Speaker 2: own frontier model partnerships like Open AI, and.
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  Speaker 1: His answer was essentially, enterprises want to control their own
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  Speaker 1: learning machine, keep the harness, memory, and contact separate from
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  Speaker 1: any single model, so they're never locked in. Microsoft's building
• 4:18
  Speaker 1: itself as the neutral platform where that choice happens. Whether
• 4:22
  Speaker 1: it's Open AI and Thropic, their own MAI models, or
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  Speaker 1: open weights.
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  Speaker 2: There's a self interested logic there too. Azure benefits no
• 4:31
  Speaker 2: matter which model wins, since it's the infrastructure underneath all
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  Speaker 2: of them. Amy had called it fungible infrastructure.
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  Speaker 1: On margins, gross margin ticked down to sixty seven percent
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  Speaker 1: company wide, mostly the mixed shift toward Azure and continued
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  Speaker 1: AI infrastructure investment. Operating margin actually held up well at
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  Speaker 1: forty five percent, up slightly year over year.
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  Speaker 2: One thing management leaned on repeatedly was efficiency as the
• 5:00
  Speaker 2: offset to rising component costs. Amyhood specifically addressed the hardware
• 5:05
  Speaker 2: pricing question, saying KPEX is mostly short lived assets like
• 5:09
  Speaker 2: CPUs and GPUs that can flex faster than data center builds.
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  Speaker 2: If demand shifts, that gives them room to manage margin
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  Speaker 2: risk if pricing pressure continues.
• 5:20
  Speaker 1: Not everything is rosy, though Windows OEM revenue is guided
• 5:24
  Speaker 1: down and more personal computing overall is expected to decline
• 5:27
  Speaker 1: in the coming quarter, driven by weak PC demand and
• 5:31
  Speaker 1: rising component prices. Xbox also had a rough quarter revenue
• 5:35
  Speaker 1: down ten percent, though Satya said they expect to return
• 5:39
  Speaker 1: that business to growth in fiscal twenty twenty seven.
• 5:42
  Speaker 2: For the full fiscal year twenty twenty seven outlook management
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  Speaker 2: guided to another year of double digit revenue and operating
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  Speaker 2: income growth, KPEX growing year over year, and operating margins
• 5:54
  Speaker 2: down less than a point. So the AI investment cycle
• 5:58
  Speaker 2: isn't slowing down. If anything, it's intensifying.
• 6:02
  Speaker 1: So what does this mean for investors going forward?
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  Speaker 2: The core commercial cloud business, as you're in three sixty
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  Speaker 2: five copilot GitHub is executing well and actually accelerating, not
• 6:15
  Speaker 2: just holding steady. That's the bowl case. The tension to
• 6:19
  Speaker 2: watch is the KPEX intensity. They're spending enormous amounts to
• 6:23
  Speaker 2: keep up with demand, and the payoff depends on continued
• 6:26
  Speaker 2: efficiency gains and enterprises actually converting copilot usage into higher
• 6:31
  Speaker 2: value subscriptions like E seven, And.
• 6:34
  Speaker 1: Of course everything discussed is AI generated analysis for educational purposes.
• 6:39
  Speaker 1: Past performance doesn't guarantee future results. Please do your own
• 6:44
  Speaker 1: due diligence.
• 6:45
  Speaker 2: With AZURE accelerating into the mid forties and copilot usage
• 6:49
  Speaker 2: intensity climbing, next quarter's print will tell us whether this
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  Speaker 2: momentum is durable or a peak.
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  Speaker 1: That's it for this episode of Beta Finch.
• 6:59
  Speaker 2: Thanks for listen listening. We'll catch you next time.