NEW YORK, July 30, 2026 – Microsoft Corporation (NASDAQ:MSFT) experienced a significant surge in its stock price during Thursday's premarket session, climbing 8.81% to $424.93. This jump came after the company reported a reduction in its overall AI order backlog, which helped alleviate investor concerns about ongoing capital expenditures. The stock had closed at $390.54 on Wednesday.
The premarket move surpassed options market expectations, which had anticipated a 6.6% swing following the earnings report. The actual increase exceeded those projections by 2.21 percentage points, representing a roughly one-third larger gain. Based on the premarket price and 7.43 billion shares outstanding, Microsoft's market value swelled by approximately $256 billion.
Key Financial Metrics Exceed Expectations
Microsoft's fiscal fourth-quarter results beat consensus estimates across all major operating metrics. Revenue came in at $90.0 billion, surpassing the analyst consensus of $87.62 billion by 2.7%. Non-GAAP diluted earnings per share reached $4.74, compared to the expected $4.24, a beat of 11.8%. Free cash flow totaled $19.6 billion, significantly above the $13.44 billion forecast, representing a 45.8% upside.
Azure revenue growth accelerated to 43% in the June quarter, up from 40% in the previous quarter and ahead of the 39.98% consensus. Microsoft guided for approximately 45% constant-currency growth in the September quarter, while Visible Alpha's consensus stood at 40.92%.
AI Demand Broadens Beyond Frontier Models
A key indicator for investors was the broadening of contracted demand. Commercial remaining performance obligation (RPO), which tracks contracted revenue not yet recognized, reached $678 billion. This marked an 8.1% sequential increase of $51 billion from the March quarter's $627 billion. Notably, the entire sequential rise was driven by customers other than top AI-model developers, known as frontier-model firms.
RPO grew 84% year-on-year, or 25% when excluding OpenAI. Customers outside frontier-model companies accounted for nearly 90% of cloud revenue during the fiscal year. Microsoft expects approximately 30% of its RPO to convert to revenue within the next 12 months, equating to roughly $203.4 billion. The short-term segment increased 37% compared to the prior year.
Copilot Subscription Growth Accelerates
Microsoft 365 Copilot emerged as a significant driver of AI monetization. Paid subscriptions surged from 20 million in the March quarter to over 30 million in the June quarter, exceeding the analyst estimate of 26.9 million. Sequential net additions more than doubled, signaling accelerating adoption. CEO Satya Nadella noted that Azure revenue had "crossed $100 billion for the first time," underscoring the platform's scale.
Segment Performance Mixed
While cloud and AI segments thrived, other parts of Microsoft's portfolio showed varied performance. Productivity and Business Processes revenue increased 14%, Intelligent Cloud advanced 32%, but More Personal Computing decreased 4%. Windows and Devices slipped 7%, and Xbox content and services declined 10%.
Operating cash flow grew 30% to $55.4 billion, while capital expenditure totaled $41 billion. Free cash flow slipped 23% to $19.6 billion, yet still surpassed expectations by a wide margin.
Capital Expenditure Outlook and Risks
Investors should approach the reduced $175 billion 2026 capex figure with caution. Microsoft extended the expected lifespan of its data centers and facilities from 15 to 25 years, and more leases will now be accounted for outside reported capex. Executives stated the company's core investment plans remain unchanged.
Significant risks persist. Microsoft reported $329.1 billion in unstarted data-center leases. Capital expenditure is set to climb further in fiscal 2027, while Azure demand continues to outpace capacity. Should backlog conversion slow, Thursday's premarket rerating could come under pressure.
Bryan Hayes from Zacks commented that investors realized "the spending is buying something real," reflecting the market's reassessment of Microsoft's AI investment strategy.
