Microsoft reported full-year revenue growth of 15% year-over-year, driven by continued strength in its cloud and AI businesses. In Q4 2025, revenue climbed 18% from the prior year, with commercial remaining performance obligations (RPOs) surging 51% to $392 billion. Azure and related cloud services again led the way, contributing more than 40% of total Intelligent Cloud revenue, underscoring sustained enterprise demand for AI-powered solutions.

The company invested a record $34.9 billion in capital expenditures during its first fiscal quarter, including $11.1 billion in finance leases, to expand data-center capacity for AI workloads. Management forecasts an acceleration of this spending cadence through 2026 as capacity constraints—not lack of demand—remain the primary bottleneck. These investments will add thousands of additional server racks optimized for large-language models and other generative AI applications.

Despite heavy spending on infrastructure, Microsoft generated $25 billion in free cash flow in its most recent quarter, driven by its high-margin software franchises and existing Azure scale. This robust cash generation allows the company to fund its AI and cloud build-out without taking on significant debt, preserving a pristine investment-grade balance sheet and providing flexibility for future strategic investments or shareholder returns.