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Microsoft (NASDAQ:MSFT | MSFT Price Prediction) has delivered one of the most dramatic post-earnings rallies in mega-cap history.
By the morning of August 4, a sudden rally after the quarterly earnings erased all stock market losses Microsoft (NASDAQ: MSFT) had suffered in 2026 – previously one of the firm's worst years on record – and pushed the equity 3.11% into the green.
Amazon (NASDAQ: AMZN | AMZN Price Prediction) and Microsoft (NASDAQ: MSFT) each posted blowout quarters and jumped on the results.
The rally in Microsoft shares “has legs” because its capital spending is showing a payoff.
Artificial intelligence has entered a new phase.
One of the things that was not entirely clear when Amazon (NASDAQ: AMZN | AMZN Price Prediction), Alphabet (NASDAQ: GOOG), and Microsoft (NASDAQ: MSFT) announced their earnings was the extent to which Microsoft leads Alphabet in cloud market share.
Microsoft delivered a robust fiscal 2026 finish, with Q4 sales up 18% to $90B and cloud growth accelerating to 32%. MSFT's Intelligent Cloud segment now leads, driving optimism despite elevated capital spending guidance of $175B for calendar 2026. Double-digit sales growth is guided for FY27, but operating margins are expected to decline by about a point amid gross margin pressure.
MSFT's record-breaking rally post earnings release fuels AI enthusiasm and boosts tech ETFs with strong MSFT exposure.
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Artificial intelligence has done more than ignite a spending boom.
Microsoft delivered a strong Q4, with revenue of $90B (+18% YoY) and EPS of $4.81, both beating expectations. Azure revenue growth accelerated to 43%, outpacing guidance, as elevated AI-driven CapEx is translating into faster top-line expansion. Management projects double-digit revenue and operating income growth for FY27, with Azure growth expected to accelerate further, despite near-term margin pressure.