Microsoft reports $19.6 billion free cash flow as AI spending ramps up

Microsoft Corp. said its fiscal fourth-quarter revenue rose 18% to $90 billion, and net income increased 31% to $35.76 billion, compared with the same period a year earlier. Earnings per share were $4.81, up from $3.86 a year ago. The company also reported free cash flow of $19.6 billion, despite capital expenditures of roughly $175 billion for the year, a figure that CFO Amy Hood said would remain positive in fiscal 2027.

CEO Satya Nadella noted that Azure cloud revenue surpassed $100 billion for the first time and that Microsoft 365 Copilot reached more than 30 million paid seats, indicating strong customer demand for AI-driven services. He added, "We are advancing the frontier on the cost-to-outcome curve, ensuring every customer can turn tokens into business results."

Analysts highlighted that, unlike Alphabet and Tesla, Microsoft did not raise its capex outlook and said it could adjust spending if the AI-hardware market tightens. CFO Hood explained that a shift of some data-center leases from finance to operating leases reduced the reported capex figure, giving the company flexibility to slow build-out if demand changes.

Alphabet reported revenue growth of 24% to $119.8 billion but posted a negative free cash flow of $5.9 billion, while Tesla posted revenue of $28.2 billion and a negative free cash flow of $1.1 billion, prompting concerns about their ability to fund AI investments.

Microsoft’s stock rose about 13% in after-hours trading following the earnings release.