Microsoft shares jumped as much as 10% in pre-market trading Thursday after the company forecast accelerating cloud growth and said its massive artificial intelligence investments are delivering returns, signalling that Europe's reliance on American tech infrastructure for AI deployment will deepen.
The company expects revenue of between $89.85 billion and $90.95 billion in the July-September quarter, representing growth of 16% to 17%. It forecast Azure revenue would grow by approximately 45% in constant currency, up from 43% in the quarter just ended. Microsoft said revenue rose 18% year-on-year to $90 billion in the April-June period, beating analysts' forecast of $87.6 billion.
Record Profit Driven by AI Investment
Net profit climbed 31% to a record $35.8 billion, helped by a $3.2 billion unrealised gain on Microsoft's investment in the AI company Anthropic. Diluted earnings per share reached $4.81, above analysts' forecast of $4.24. Microsoft Cloud revenue was $59.3 billion, up 27% year-on-year, and Azure and other cloud services revenue increased by 43%. The company said demand for Azure continued to exceed available capacity, even after it brought additional computing infrastructure online during the quarter.
For the full fiscal year ended in June, Microsoft reported $331.8 billion in revenue. CEO Satya Nadella said yesterday, "This year, Azure revenue surpassed $100 billion for the first time, and Microsoft 365 Copilot reached over 30 million paid seats, reflecting the confidence customers are placing in us to power their AI transformation."
Michael J. Wolf, founder and CEO of Activate Consulting, said the concurrent Azure and Copilot growth indicates that Microsoft is "winning on both fronts," adding that the company is supplying cloud infrastructure for enterprise AI while monetising AI tools embedded in products workers use every day.
Capital Expenditure Plans Unchanged
Chief financial officer Amy Hood said the company's capital expenditure plans for the 2026 calendar year remain unchanged. She said an accounting change will bring that guidance closer to approximately $175 billion, but in practice the expectations remain "unchanged." Hood had earlier said Microsoft expects to invest $190 billion in capital expenditures in 2026.
Bryan Hayes, an investment strategist at Zacks Investment Research, said that "for the first time in three quarters, the market appears willing to grant that the spending is buying something real." Danielle Criste, Microsoft's director of investor relations, said, "We remain very confident in the long-term return on these investments, given these strong demand signals, the increasing product usage we've seen and the efficiencies that we're driving across the platform."
Meta's Mixed Results
Meta Platforms said yesterday its second-quarter profit declined even as revenue beat Wall Street's expectations, as legal expenses and severance costs weighed on its results. The Facebook and Instagram parent company earned $15.85 billion in the April-June period, down 14% from $18.34 billion in the same period a year earlier. Revenue grew 28% to $60.8 billion from $47.52 billion. Meta earned $6.18 per share, below the $7.19 expected by analysts surveyed by FactSet, while analysts had forecast revenue of $60.22 billion.
Total costs and expenses jumped 55% to $42.03 billion, including $2.4 billion in charges related to legal proceedings and $1.18 billion in severance expenses connected with Meta's May workforce reduction. Its operating margin narrowed to 31% from 43% a year earlier. CEO Mark Zuckerberg said in a statement, "AI is accelerating our core business today, powering our next generation of products, and opening the door to entirely new enterprise opportunities. The results are already showing, and I'm optimistic about the potential ahead."
Why This Matters:
Microsoft's results underscore Europe's growing dependence on American cloud infrastructure for artificial intelligence deployment, raising questions about digital sovereignty at a time when the EU is pushing for technological autonomy. Azure's capacity constraints — demand exceeding supply even after new infrastructure came online — suggest European businesses seeking AI capabilities will face continued reliance on US providers. The company's planned $175 billion in capital expenditure dwarfs European tech investment, highlighting the competitiveness gap that threatens the continent's ability to develop independent AI capabilities. For European policymakers balancing innovation with regulatory oversight, Microsoft's success demonstrates that heavy capital investment and light-touch regulation can deliver commercial returns — a model the EU has struggled to replicate. Meta's legal costs and workforce reductions, meanwhile, reflect the regulatory burden American tech companies face globally, including from European authorities.