Microsoft joins the $4 trillion club, plans to spend over $30 billion on capex this quarter
Microsoft’s blowout FY25 Q4 earnings powered a surge in shares making it the second $4 trillion company, joining an elite club shared only by Nvidia.
Microsoft had a blowout fiscal fourth quarter, beating estimates for earnings and revenue. In premarket trading, shares surged over 8%, pushing the valuation above $4 trillion, an elite club only shared with Nvidia.
On the earnings call last night, CEO Satya Nadella summed up the company’s impressive fiscal year performance:
“It was a very strong close to what was a record fiscal year for us. All up, Microsoft Cloud surpassed $168 billion in annual revenue, up 23%. The rate of innovation and the speed of diffusion is unlike anything we’ve seen.”
Like Nvidia, Microsoft’s surging valuation is powered by white-hot demand for AI computing. The legacy tech giant has nimbly positioned itself for success in a fast-moving, young AI industry:
🤝 It has a big (if strained) partnership with market leader OpenAI.
☁️ Most importantly, Microsoft’s Azure cloud computing platform and massive data centers (over 400 of them) are AI-model-agnostic — they will sell computing for pretty much any company and any AI model or application.
Indeed, Azure’s performance was a big driver of growth for the quarter, with Azure (and other cloud services) revenue growth increasing 39% year on year.
For the first time, the company revealed how much money Azure has made: more than $75 billion in annual revenue.
That number could have been even higher if supply weren’t an issue.
“While we brought additional data center capacity online this quarter, demand remains higher than supply,” CFO Amy Hood said.
The demand is so high for Microsoft’s cloud computing services that it has a significant contracted backlog — $368 billion worth.
To catch up with that demand, Hood said on the earnings call last night that the company continues to spend huge on capex: “We expect Q1 capital expenditures to be over $30 billion driven by the continued strong demand signals we see.”
But Hood cautioned that the capex seen in FY25 might not be the norm:
“Capital expenditure growth, as we shared last quarter, will moderate compared to FY25 with a greater mix of short-lived assets. Due to the timing of delivery of additional capacity in H1, including large finance lease sites, we expect growth rates in H1 will be higher than in H2.”
Update (10:23 a.m. ET): a previous version of this piece attributed Google’s AI model to Microsoft.
