With its pipeline growing 37% to $368 billion and cloud revenue up 27% to $46.7 billion and Azure revenue expected to spike by 37% in the current quarter, Microsoft’s remarkable fiscal-Q4 performance has to be recognized as the greatest set of quarterly financial results in the history of business.
And that superb across-the-board growth was tempered by customer demand that was so strong it continued to overwhelm Microsoft’s ability to meet it.
In the meantime, in an indication of its potential to continue growing at a scale and arc unmatched by any other company in the world, Microsoft late last week saw its market cap briefly surpass and currently flirt with $4 trillion — rarified air so thin that no other company has ever come close.
If anyone can show me a set of quarterly numbers that stacks up to Microsoft’s Q4, please send it to me and if it proves me wrong, I’ll eat my AI-powered whiteboard — and will do so on camera.
In his classically eloquent and understated way, CEO Satya Nadella framed the unprecedented position in which Microsoft finds itself. In his opening remarks on last week’s earnings call, Nadella said, “The rate of innovation and the speed of diffusion is unlike anything we’ve seen. To that end, we are building the most comprehensive suite of AI products and tech stack at massive scale.”
For its fiscal ended June 30, Microsoft rang up extraordinary growth in all facets of its cloud and AI business and expects more of the same well into the future. Let me share the most-relevant numbers and then I’ll discuss three key market dynamics within those figures:
- RPO up 37% to $368 billion, aka more than a third of a $1 trillion;
- and what business on the scale of $300 billion or more has ever had a pipeline growing at 37%??
- after posting cloud growth rates for the past four quarters of 22%, 22%, 21%, and 20%, Microsoft stomped all over the law of gravity by spiking its Q4 growth rate to $46.7 billion;
- Azure, the cornerstone of Microsoft’s cloud and AI businesses, generated full fiscal-year revenue growth of 34% to more than $75 billion, marking the first time Microsoft has released a specific revenue figure for Azure;
- but wait — there’s more! Azure Q4 revenue also reaccelerated dramatically to 39% — here are its growth numbers for the past five quarters: 34%, 33%, 31%, 33%, 39%;
- CFO Amy Hood said Microsoft expects the Azure growth spurt to continue with Q1 guidance of 37%;
- total cloud revenue for the year was $168 billion, up a whopping 23%;
- Q1 CapEx is being cranked up to $30 billion to try to close the gap beyond surging demand and constrained supply; and
- supply will probably not begin to catch up with demand until the end of this calendar year, which will mark the midway point of Microsoft’s fiscal year. Hood said: “Even as we continue bringing more data center capacity online, we currently expect to remain capacity-constrained through the first half of our fiscal year.”
AI Agent & Copilot Summit is an AI-first event to define opportunities, impact, and outcomes with Microsoft Copilot and agents. Building on its 2025 success, the 2026 event takes place March 17-19 in San Diego. Get more details.
What Does This Mean for Customers — and Competitors?
The astonishing Q4 numbers — on the call, one analyst said “the magnitude of the upside had shocked” many analysts — represent one of the most-compelling and unambiguous proof-points that the AI Revolution is real and urgent and massive. And I think these numbers are also a clear message to any CEO of any business: the absolute worst decision to make right now about AI is to do nothing.
They also drive (another) stake through the heart of the flimsy and baseless reports from a few months back that Microsoft and AWS and Google Cloud and Oracle had somehow “overbuilt” their data-center capacities. In fact, quite the opposite is true: all four hyperscalers report that customer demand is far outstripping supply and will continue to do so for at least two or three more quarters.
So here are my three key takeaways from Microsoft’s Q4, aka the greatest quarterly performance any publicly traded company has ever reported:
- Microsoft’s scale and speed are unprecedented. While Google Cloud and Oracle and AWS are all growing at excellent rates and innovating across their expansive product portfolios, Microsoft — whose quarterly cloud revenue is almost as big as the combined cloud revenue of those three great competitors — demonstrated decisively that it can match any of them in innovation acceleration, market agility, and customer appeal;
- That competition is only intensifying. Last week, Google Cloud also posted outstanding quarterly results, with revenue up 32% to $13.6 billion and backlog up 38% to $108 billion, and recently Oracle said its RPO had shot up 62% for its quarter ended May 31 and should reach 100% for the fiscal-year ending May 31 of 2026. (The latest numbers for AWS came out after this piece was written.)
- When skyrocketing CapEx is a good thing! I doubt any industry ever underwent an infrastructure buildout as big and broad and intense as what’s taking place within the Cloud Wars and particularly among the hyperscalers. For 2025, they’ll spend well above $300 billion, and there’s little reason to think that number will go down in 2026. The upshot of that will be more innovation for customers, better performance for customers, better pricing for customers, and better business outcomes for customers. So let me add this fourth bonus point:
- In the Cloud Wars, the biggest winners are always — always! — the customers!
Ask Cloud Wars AI Agent about this analysis
