Microsoft Stock Jumps Nearly 30% as Analysts Raise Targets After Q4 Beat

Key Takeaways

• Microsoft shares closed at $506.06 on August 10, almost 30% above their July 29 pre-earnings close, after recording their biggest one-day percentage gain in 18 years.
• Fiscal Q4 revenue rose 18% to $90 billion, adjusted earnings reached $4.74 per share and Azure revenue grew 43%, while Microsoft Cloud revenue climbed to $59.3 billion.
• Bernstein raised its Microsoft price target to $660 and Tigress Financial lifted its target to $690, although more than $50 billion of expected first-quarter capital expenditure keeps cash generation in focus.

Microsoft Stock Extends Its Post-Earnings Rally

Microsoft stock continued its sharp post-earnings recovery on Monday, August 10, closing 1.21% higher at $506.06. The shares have now gained approximately 29.6% from their $390.54 close on July 29, before the company released its fiscal fourth-quarter results after the bell.

The strongest move came in the first trading session after the report. Microsoft shares surged 15.5% on July 30, their largest daily percentage advance in 18 years, adding about $450 billion to the company’s market value in a single session. Further gains followed as investors reassessed whether the company’s heavy artificial-intelligence spending was beginning to translate into faster cloud revenue and a larger contracted backlog.

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Azure Growth Delivers a Broad Q4 Beat

Microsoft reported fiscal Q4 revenue of $90.0 billion, an increase of 18% from a year earlier and above the market estimate of about $87.6 billion. Adjusted diluted earnings were $4.74 per share, compared with the $4.24 consensus forecast. On a reported basis, diluted earnings reached $4.81 per share, while net income increased 31% to $35.8 billion.

Cloud demand supplied the main earnings surprise. Azure and other cloud-services revenue grew 43% year over year, beating expectations of approximately 40%. Azure exceeded $100 billion in annual revenue for the first time, while Microsoft Cloud revenue rose 27% to $59.3 billion during the quarter.

Copilot adoption provided another indication that Microsoft is monetising AI beyond infrastructure. Microsoft 365 Copilot surpassed 30 million paid seats, with net seat additions more than doubling from the previous quarter. The company also said Copilot revenue accelerated by more than 60% quarter over quarter, strengthening the view that generative-AI products are becoming a more meaningful part of its software business.

The results were not uniformly positive. More Personal Computing revenue declined 4% to $12.9 billion, while Windows OEM and Devices revenue fell 7% and Xbox content and services dropped 10%. Cloud strength nevertheless dominated the market response.

Wall Street Raises Microsoft Price Targets

The earnings beat and stronger outlook prompted further bullish calls. Bernstein SocGen Group raised its Microsoft price target to $660 from $647 on August 10 while maintaining an Outperform rating, highlighting disciplined data-centre expansion and commitments spread across several years.

Tigress Financial had already increased its target to $690 from $680 while keeping a Buy rating. Its bullish view rests on Azure growth, Copilot adoption and Microsoft’s wider software ecosystem.

Microsoft also featured in a broader market upgrade from JPMorgan. The bank lifted its 2026 year-end target for the S&P 500 to 8,000 from 7,800 and raised its 2026 index earnings estimate to $365 per share, citing stronger cloud growth and expanding backlogs at Microsoft, Alphabet and Amazon.

A $678 Billion Backlog Supports the AI Case

Microsoft’s commercial remaining performance obligation, a measure of contracted revenue not yet recognised, rose 84% year over year to $678 billion.

The backlog was not solely dependent on OpenAI. Excluding OpenAI, it still increased 25%, while all sequential growth came from customers outside frontier-model companies. About 30% of the total is expected to be recognised as revenue within 12 months, and the backlog has a weighted average duration of 2.3 years.

Management expects Azure revenue to grow approximately 45% in constant currency in the first quarter of fiscal 2027. Customer demand still exceeds available capacity, meaning additional data-centre supply could translate into revenue relatively quickly if deployments remain on schedule.

Capital Spending Remains the Central Risk

The infrastructure build-out remains the main counterweight to the bullish revenue outlook. Capital expenditure reached $41 billion in fiscal Q4, up more than 70% year over year. Roughly two-thirds went towards shorter-lived assets, primarily CPUs and GPUs.

Microsoft added 31 data centres during the quarter and approximately one gigawatt of capacity. It remains on track to roughly double overall capacity within two years.

First-quarter fiscal 2027 capex is expected to exceed $50 billion. The calendar-year 2026 forecast fell to approximately $175 billion from about $190 billion, but this reflected a lease-accounting change after Microsoft extended the estimated useful life of data centres and offices from 15 to 25 years—not an investment slowdown.

Uncommenced lease commitments reached $329.1 billion at the end of June, up from $196.6 billion in the previous quarter. Most relate to future data-centre capacity, creating substantial long-term obligations if AI demand weakens.

Free cash flow fell approximately 23% to $19.6 billion as spending increased. Operating cash flow still rose 30% to $55.4 billion, and management expects positive free cash flow throughout fiscal 2027. Whether cash generation can keep pace with infrastructure investment remains a central issue for the stock.

Conclusion

Microsoft’s Q4 results provided evidence that AI infrastructure spending is supporting faster Azure growth, higher Copilot adoption and a record commercial backlog, helping Microsoft stock rise almost 30% from its pre-earnings close. The next test is execution: whether Azure reaches the approximately 45% growth forecast, the $678 billion backlog converts into revenue, and cash generation keeps pace with capital expenditure above $50 billion this quarter.