Microsoft financial report is about to be announced: Azure growth rate and capital expenditure guidance are key
The fourth quarter financial report for fiscal year 2026 will be released after the market closes this Wednesday. This report card comes at a time when the company's stock price has retraced nearly 30% from its historical high. The market focus has shifted from pure performance to testing whether its huge investment in artificial intelligence can be converted into actual returns. According to consensus market expectations, Microsoft's fourth-quarter revenue is expected to be approximately US$87.4 billion, a year-on-year increase of 14.3%, and adjusted earnings per share are expected to be US$4.21. However, the real core variables that may trigger stock price fluctuations lie in two aspects: the growth momentum of the Azure cloud business and the capital expenditure guidance for fiscal 2027. Azure's revenue growth is seen as a key yardstick for measuring the rationality of AI investments. Microsoft's previous official guidance was growth of 39% to 40% at constant exchange rates. Many institutions believe that Azure's growth rate needs to reach or exceed this range to dispel market concerns. Analysts have made it clear that Azure's annual growth rate reaching or exceeding 39%-40% is a necessary condition for the stock price to recover. Failure to meet expectations will intensify concerns about the return on investment in AI. Capital expenditure plans are another key focus. To expand its AI computing infrastructure, Microsoft's total investment in fiscal year 2026 is expected to be as high as approximately US$190 billion, causing its free cash flow to fall sharply to US$15.8 billion from US$25.7 billion in the previous quarter. The market is closely watching management's comments on capital spending for the next fiscal year, with current consensus expectations for fiscal 2027 spending of about $22 billion. If the guidance is much higher than this number, it will further trigger market concerns about pressure on free cash flow. In addition, the commercialization process of AI assistant Copilot is also one of the highlights of the financial report. Its paid commercial seats exceeded 20 million last quarter, and its annual AI business revenue exceeded US$37 billion. Since July 1, Microsoft 365 Business Edition has officially built-in Copilot, and its subsequent adoption rate data will prove whether the AI function can become a stable source of revenue. Analysts are generally optimistic about Microsoft's long-term prospects, with about 95% giving it a "buy" rating. and HSBC Research gave target prices of US$610 and US$567 respectively. However, the market is also wary of risks. If Azure's growth rate or capital expenditure guidance falls short of expectations, bearish sentiment in the AI industry may gain more leverage.