Haverhill Financial Research · Analysis · Big Tech · October 23, 2026
The short version
Microsoft reports results for its fiscal first quarter after the close on October 28. The quarter it reported in July set a high bar. Revenue rose 18% to $90.0 billion, operating income rose 18% to $40.6 billion, and Azure and other cloud services grew 43%. The number that drew the most attention was further down the page: capital spending, including finance leases, was $35.8 billion, up from $17.1 billion a year earlier.
Revenue growth by segment, year over year. Source: Microsoft FY26 Q4 earnings release.
Where the growth came from
Nearly all of it came from the cloud. Intelligent Cloud revenue rose 32% to $39.3 billion. Microsoft Cloud, the company's broader measure that also counts commercial Office and Dynamics, reached $59.3 billion, up 27%. Productivity and Business Processes grew a steadier 14%. More Personal Computing, which holds Windows, devices, Xbox and search, shrank 4%, and Xbox content and services fell 10%.
| Segment | Revenue | Growth |
|---|---|---|
| Intelligent Cloud | $39,306M | +32% |
| Productivity and Business Processes | $37,847M | +14% |
| More Personal Computing | $12,854M | −4% |
| Total revenueSum of the three segments | $90,007M | +18% |
| Operating income | $40,603M | +18% |
The backlog is the strongest signal
Commercial remaining performance obligation, which is contracted revenue Microsoft has not yet recognized, rose 84% to $678 billion. That is far faster than revenue is growing, and it tells you customers are signing large, multi-year commitments ahead of the capacity Microsoft is building. It also explains why the company is spending at this pace: the orders are already on the books.
The spending question
For the full fiscal year, capital spending came to $115.9 billion. Operating margin held at about 45%, the same as a year earlier, because revenue and operating income grew at the same rate. So far the extra depreciation has not dented profitability. Microsoft still returned $11.3 billion to shareholders in the quarter, $4.6 billion through buybacks and $6.8 billion in dividends. Diluted earnings per share were $4.81.
What to watch on October 28
Azure growth. Anything close to 43% would show demand is still running ahead of supply.
Capital spending. Whether the quarterly figure keeps climbing from $35.8 billion, and what management says about the year.
Backlog. Commercial remaining performance obligation, last at $678 billion.
Gaming and Windows. More Personal Computing was the only segment that shrank last quarter.
Our take
Microsoft is in the unusual position of spending more than $100 billion a year on data centers and keeping its margin flat while doing it. The backlog suggests the spending is matched to signed demand rather than hope. The risk we would keep an eye on is timing. If Azure growth slows before the new capacity is fully used, depreciation will start to show up in the margin. For now the numbers point the other way.
Sources and disclosures
Figures come from Microsoft's fiscal 2026 fourth-quarter earnings release, filed with the SEC on July 29, 2026. Operating margin and shareholder return totals are our calculations from company figures.
Disclosures. Haverhill Financial Research is a publisher of general financial commentary. This article is not personalized investment advice and does not consider any reader's financial situation; readers should do their own research. Nothing here is a recommendation to buy or sell any security. Company figures and guidance can change. The author of this post does not hold positions in Microsoft or the other companies named. Data as of October 23, 2026.
