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SummaryMicrosoft delivered robust fiscal Q4 results, with EPS of $4.74 and revenue of $90 billion, both beating consensus estimates.MSFT's cloud-driven growth, especially Azure’s 39% YoY increase, underpins a reiterated "Buy" rating and a 20%+ intrinsic value upside.Heavy capex into AI infrastructure and $130 billion in data center leases signal aggressive long-term positioning despite a near-term FCF dip.Technicals show mixed signals, but strong RSI momentum and operational strength suggest a long-term low may be in place. tupungato/iStock Editorial via Getty Images

With the bulk of mega-cap tech earnings in hand, it’s clear that Microsoft (MSFT) and Amazon (AMZN) were the winners. The pair of AI hyperscalers posted prodigious capex numbers, but the street did not punish shares. Cloud revenues were solid, and

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Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Shares of Microsoft (MSFT +3.02%) rose nearly 22% this past week after the tech titan reported impressive artificial intelligence (AI)-fueled growth metrics.

Image source: Getty Images.

Cloud gains Microsoft's revenue jumped 18% year over year to $90 billion in its fiscal 2026 fourth quarter, which ended on June 30.

The gains were driven by the stunning performance of its cloud infrastructure platform, Azure, which saw sales soar 43%. CEO Satya Nadella said Azure's annual revenue topped $100 billion for the first time in fiscal 2026.

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AI features are boosting sales of Office apps Microsoft's productivity and business processes division also saw solid gains, with revenue rising 14% to $37.8 billion in the fourth quarter.

Nadella highlighted the growth of the company's AI assistant for its popular office apps Word, Excel, and Teams.

"Microsoft 365 Copilot reached over 30 million paid seats, reflecting the confidence customers are placing in us to power their AI transformation," Nadella said.

Microsoft remains incredibly profitable All told, the software maker's adjusted net income climbed 22% to $35.3 billion, or $4.74 per share. That handily surpassed Wall Street's estimates, which had called for per-share profits of $4.24.

Investors were also relieved to hear that Microsoft expects to remain free cash flow positive in fiscal 2027, even as the company ramps up its investments to meet the booming demand for its AI services.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft. The Motley Fool has a disclosure policy.

Once again, Microsoft (MSFT +3.02%) delivered a strong quarter, driven by its cloud computing segment and growing adoption of Copilot. And for once, the stock surged higher on the news. However, it is still trading down year-to-date and off more than 10% over the past year.

Let's take a closer look at the company's fiscal Q4 results to see if its rally can continue.

Image source: The Motley Fool.

Azure growth continues Microsoft's cloud computing unit, Azure, once powered its growth, with revenue soaring 43% year over year. It was the 12th straight quarter in which Azure revenue rose by 30% or more, and it surpassed $100 billion for the fiscal year. Demand continues to outstrip capacity, and Azure revenue is projected to accelerate to 45% constant-currency growth in Q1.

Bookings rose 10% and were up 18% when excluding OpenAI. Remaining performance obligations (RPOs), which include future Azure commitments, surged 84% year over year to $678 billion. The company said about 30% of these commitments will be recognized as revenue over the next 12 months. Notably, it said all of the sequential growth it saw came from non-AI model companies.

Microsoft's total revenue rose 18% year over year to $90 billion, while adjusted earnings per share (EPS) increased 23% to $4.74. The results topped the analyst consensus for $87.62 billion in revenue and $4.24 in adjusted EPS, as compiled by LSEG.

Overall "intelligent cloud" revenue, which includes Azure and GitHub, climbed by 32% year over year to $39.3 billion. The company introduced a usage-based pricing model for GitHub Copilot in the quarter, which helped drive a 60% sequential increase in GitHub Copilot revenue and seat expansion.

Microsoft's productivity and business processes segment, home to Microsoft 365 and LinkedIn, saw revenue climb 14% year over year to $37.8 billion. Growth was solid across its four main solutions in the segment (in the table), led by a 24% jump in Microsoft 365 Consumer cloud revenue, helped by an earlier price increase. Meanwhile, it said paid Microsoft 365 Copilot seats reached 30 million, with net adds doubling quarter over quarter.

Product

Q3 Revenue Growth (YOY)

Microsoft 365 Commercial

16%

Microsoft 365 Consumer

24%

LinkedIn

12%

Dynamics

13%

Data source: Microsoft press release. YOY = Year over year.

Revenue in its "more personal computing" segment, where Windows and Xbox reside, decreased by 4% year over year to $12.9 billion. Its search and news advertising business saw solid growth, with revenue up 10%. Windows OEM and device revenue, meanwhile, fell by 7%, while Xbox revenue dropped 10%. Windows was hurt by lower PC demand, which is expected to continue given high component costs.

Looking ahead, management projects fiscal 2027 Q1 revenue between $89.85 billion and $90.95 billion, representing 16% growth at the midpoint. This is despite the company expecting significant pressure in the PC market. This was well above the $89.66 billion in revenue expected by analysts.

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Can Microsoft stock continue to rally? There wasn't much difference between Microsoft's results this quarter and its prior fiscal 2026 quarter, although the stock reaction was certainly much different. The company continues to see strong Azure growth, while Copilot adoption continues to pick up.

While investors have worried about the impact of AI on Microsoft's software business, the company continues to see momentum, suggesting it's likely to play a major role as an AI applications layer, given how deeply embedded Microsoft 365 and its programs are in the enterprise space. Meanwhile, Azure has been a huge growth engine, and its future commitments point to continued strong cloud computing growth.

With a forward price-to-earnings (P/E) ratio of below 23.5 based on fiscal 2027 analyst estimates (ending June 2027), Microsoft's stock is still attractively valued even after its post-earnings surge. With sentiment starting to shift, I think the stock has solid upside ahead over the coming years.

New York, New York--(Newsfile Corp. - August 2, 2026) - WHY: Rosen Law Firm, a global investor rights law firm, reminds purchasers of common stock of Microsoft Corporation (NASDAQ: MSFT) between May 1, 2025 and January 28, 2026, inclusive (the "Class Period"), of the important August 11, 2026 lead plaintiff deadline.

SO WHAT: If you purchased Microsoft common stock during the Class Period you may be entitled to compensation without payment of any out of pocket fees or costs through a contingency fee arrangement.

WHAT TO DO NEXT: To join the Microsoft class action, go to https://rosenlegal.com/cases/microsoft-corporation/join or call Phillip Kim, Esq. toll-free at 866-767-3653 or email [email protected] for information on the class action. A class action lawsuit has already been filed. If you wish to serve as lead plaintiff, you must move the Court no later than August 11, 2026. A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation.

WHY ROSEN LAW: We encourage investors to select qualified counsel with a track record of success in leadership roles. Often, firms issuing notices do not have comparable experience, resources, or any meaningful peer recognition. Many of these firms do not actually handle securities class actions, but are merely middlemen that refer clients or partner with law firms that actually litigate the cases. Be wise in selecting counsel. The Rosen Law Firm represents investors throughout the globe, concentrating its practice in securities class actions and shareholder derivative litigation. Rosen Law Firm has achieved the largest ever securities class action settlement against a Chinese Company. Rosen Law Firm was Ranked No. 1 by ISS Securities Class Action Services for number of securities class action settlements in 2017. The firm has been ranked in the top 4 each year since 2013 and has recovered billions of dollars for investors. In 2019 alone the firm secured over $438 million for investors. In 2020, founding partner Laurence Rosen was named by law360 as a Titan of Plaintiffs' Bar. Many of the firm's attorneys have been recognized by Lawdragon and Super Lawyers.

DETAILS OF THE CASE: According to the lawsuit, throughout the Class Period, defendants made false and/or misleading statements and/or failed to disclose that: (1) Microsoft's Copilot family of products had experienced significant brand positioning, user experience, usage, data siloing, computational capacity, organizational, and interoperability problems; (2) Microsoft's flagship proprietary AI model ranked well below competitors on a number of benchmark tests; (3) Microsoft needed to increase by billions of dollars its capital expenditures and divert graphics processing unit ("GPU") and central processing unit ("CPU") capacity away from fulfilling demand for its profitable Azure services in order to improve the competitive positioning of its critical Copilot family of products and increase its AI-related research and development ("R&D"); and (4) as a result, Microsoft had failed to convert a significant percentage of its commercial Microsoft 365 users to paid Copilot subscriptions and Microsoft's Copilot offerings had lost market share to rival products, a trend that was increasing. When the true details entered the market, the lawsuit claims that investors suffered damages.

To join the Microsoft class action, go to https://rosenlegal.com/cases/microsoft-corporation/join or call Phillip Kim, Esq. toll-free at 866-767-3653 or email [email protected] for information on the class action.

No Class Has Been Certified. Until a class is certified, you are not represented by counsel unless you retain one. You may select counsel of your choice. You may also remain an absent class member and do nothing at this point. An investor's ability to share in any potential future recovery is not dependent upon serving as lead plaintiff.

Follow us for updates on LinkedIn: https://www.linkedin.com/company/the-rosen-law-firm, on Twitter: https://twitter.com/rosen_firm or on Facebook: https://www.facebook.com/rosenlawfirm/.

Attorney Advertising. Prior results do not guarantee a similar outcome.

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To view the source version of this press release, please visit https://www.newsfilecorp.com/release/307581

Source: The Rosen Law Firm PA

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Analyst’s Disclosure: I/we have a beneficial long position in the shares of MSFT, META, AMZN, GOOGL either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

The big three cloud computing providers of Amazon (AMZN +15.32%), Microsoft (MSFT +3.02%), and Alphabet (GOOGL +6.73%) (GOOG +6.88%) have seen their stocks languish during much of the AI bull market as investors have wrestled with the massive amount of money these companies are spending on AI infrastructure capex.

However, commentary from Amazon CEO Andy Jassy may have just convinced the market how lucrative this business is for these companies. Jassy simply went over the economics of the cloud business model, saying Amazon breaks even on its AI chip and networking investments in two to three years, while their useful life is between five and six years. Meanwhile, most of its AI capacity is contracted out for at least five-year terms. Jassy also said the returns are generally better as time goes on because the actual data centers have a useful life of more than 30 years and those upfront costs don't need to be repeated.

So if you've ever wondered why the big cloud companies are spending a huge amount on AI infrastructure, it's because they are locking in huge investment returns on this spending. The market is finally starting to realize this, which is why all three cloud computing stocks look like buys right now. Let's take a closer look at each.

Image source: Getty Images.

1. Amazon

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Amazon is the originator of the entire infrastructure-as-a-service concept, and Amazon Web Services (AWS) remains the largest cloud provider in the world today. While its growth has lagged its two smaller peers, it really started to accelerate in Q2.

AWS revenue surged 37% in the second quarter, which was a big acceleration from the 28% growth it produced in Q1 and the 24% growth it generated in Q4. Meanwhile, AWS operating income skyrocketed 63% to $16.6 billion, with the business showing strong operating leverage as it began using more of its custom chips. Its backlog also more than doubled to $496 billion.

Amazon has a nice cost advantage with its custom Trainium AI accelerators and its Graviton CPUs, which helps it reduce inference and other costs. It also sells these chips to customers, which has become a $25 billion revenue run-rate business.

Amazon has said AWS could become a $1 trillion revenue business, making this a stock to buy while it's still attractively valued.

2. Microsoft

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Microsoft was really the first cloud company to embrace AI through its partnership and investment in OpenAI. With privileged access to OpenAI's large language models, Microsoft's cloud unit, Azure, has been one of the most consistent growers. Azure has grown its revenue by 30% or more each quarter over the past three years, including 43% last quarter. Meanwhile, it expects Azure revenue to accelerate to 45% growth next quarter.

Microsoft also has the largest backlog of the big three cloud providers. Its bookings grew by 84% year over year to $678 billion, and it expects to realize about 30% of that as revenue over the next year. While commitments from OpenAI account for a large chunk of that total, impressively, the company said that the entire $50 billion in sequential backlog growth it saw came from non-frontier model companies.

With demand still ahead of capacity and a huge backlog, Microsoft is set to continue to see strong cloud computing growth well into the future. Together with a leading enterprise software business, this is a top stock to own.

3. Alphabet

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Alphabet's Google Cloud saw the strongest growth of the big three cloud companies, with its revenue surging 82% to $24.8 billion last quarter and operating income more than tripling to $8.8 billion. Its backlog, meanwhile, grew to $518 billion from $462 billion in Q1.

The company arguably has the biggest cost advantage with its Tensor Processing Units (TPUs), which it developed over a decade ago and has optimized its entire software and hardware stack around. It also began recognizing TPU revenue from systems delivered to customers' own data centers in Q2, although this will become a much bigger driver next year. It is also the only cloud provider that has developed a top-tier frontier AI model, adding another cloud revenue stream.

As the company with the most complete AI stack and significant cost advantages, Alphabet is my favorite cloud computing stock, although I'd be buying all three.

Investing in artificial intelligence (AI) stocks may not be easy for all investors. However, there are some tools investors can use to see what stocks billionaire hedge fund managers own, and use their holdings to gain investment ideas. One of the more popular ones to follow is Bill Ackman, who runs Pershing Square Capital Management. Ackman is heavily exposed to the AI build-out trend via a handful of stock picks, and I think they are great ideas for most investors as well.

The three major AI stocks Ackman owns are Amazon (AMZN +15.32%), Microsoft (MSFT +3.02%), and Meta Platforms (META +3.28%). While he has other holdings that may qualify for the AI designation, these three are among his larger holdings and easily fit the description. I think all of these stocks are solid investment options, and investors should consider following Ackman's lead and purchase these three stocks.

Pershing Square Capital Management CEO Bill Ackman.  Image source: Getty Images.

1. Microsoft One of Ackman's investing traits is that he is more of a value-oriented investor. He likes to buy companies that are currently out of favor and hold them until they are fully valued. That's exactly why he took a stake in Microsoft's stock during Q1 2026, and he went in big: 15% of Pershing's portfolio is in Microsoft's stock. Microsoft appeared to be continually falling out of favor with the market until it posted impressive quarterly results a few days ago.

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Microsoft's Q4 of fiscal year (FY) 2026 was strong, and was highlighted by 43% Azure revenue growth -- Microsoft's cloud computing division. As a whole, Microsoft did great as well, with revenue rising 18% year over year and earnings per share rising 23%. These were exactly the solid results investors were looking for, and they caused Microsoft's stock to pop an impressive 15.5% the day following earnings.

However, the stock is still fairly cheap at 23 times forward earnings, and makes for a solid investment now.

2. Amazon Amazon also delivered big results, with its stock taking a big jump following earnings. Once again, the cloud computing division is the culprit, as Amazon Web Services (AWS) blew past the 31% growth Wall Street analysts were expecting. Instead, it grew at a 37% pace -- nearly matching Azure's growth rate. Because AWS is so much larger than Azure, this growth rate is downright impressive.

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Ackman first initiated his Amazon position during Q2 last year, and the stock has been about flat until Amazon's strong Q2 results caused the stock to spike. With a blowout quarter like the one investors just saw, I think this could be the catalyst Amazon needs to kick-start a huge run, and it could be among the best stocks to own over the next few weeks as the market reprices it to account for huge AWS growth.

3. Meta Platforms Meta Platforms didn't have the great quarter that these other two did, and the stock sold off 8% the day following earnings. The market wasn't impressed with Meta's 28% revenue growth, and noted that its operating margin was shrinking due to rising operating costs from the AI talent it has hired. Furthermore, its projected revenue growth rate is slowing down, making the stock seem a bit like dead money.

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That's a problem for Ackman, as Pershing Square has about 11% of its portfolio in Meta stock -- a position initiated during Q4 2025. However, investors must be patient. Meta's growth rate is still among the fastest of the big tech companies, and easily outpaces Amazon and Microsoft's. This indicates that its AI spending to boost its ad business is working, and Meta could be launching a new cloud computing service to help monetize some of its AI computing resources as well.

Meta's turnaround isn't even close to being complete, and there could be further sell-offs throughout Q3. However, I think it's still a year or so out from being a true AI powerhouse, and that transformation could vault Meta back into the conversation of one of the best AI stocks to own, but it has a lot of work to do.

NEW YORK & NEW ORLEANS--(BUSINESS WIRE)--Former Attorney General of Louisiana, Charles C. Foti, Jr., Esq., a partner at the law firm of Kahn Swick & Foti, LLC (“KSF”), announces that KSF has commenced an investigation into Microsoft Corporation (“Microsoft” or the “Company”) (NasdaqGS: MSFT). In recent years, Microsoft's cloud computing platform, known as Azure, has been its main growth driver providing customers with computing, networking, storage, mobile and web application services, arti.

by Todd Bishop & John Cook on Aug 1, 2026 at 7:40 amAugust 1, 2026 at 7:41 am

This week on the GeekWire podcast: Microsoft and Amazon both reported quarterly numbers, and both stocks rose on cloud results that beat expectations. Is all that AI spending paying off? And in related news, Microsoft sees a rare annual headcount decline, hitting product R&D hardest. 

Plus: Satya Nadella builds a Power BI dashboard out of an analyst’s research report, and touts it on the earnings call to make a bigger point. Jeff Bezos names Amazon’s chips business as the long-awaited fourth pillar. And AI House managing director Jacob Colker delivers a much-needed pep talk for Seattle tech, calling on the region to recognize and build on its strengths. 

Related stories and links Microsoft and Amazon earnings

Microsoft Azure tops $100B in annual revenue as record AI spending cuts into cash flow AWS is ‘booming,’ but Amazon’s free cash flow turns negative on record AI spending Microsoft R&D jobs drop for second straight year as total headcount falls for first time in a decade Which Microsoft businesses are growing and shrinking, according to obscure table in regulatory filing Amazon’s fourth pillar

Jeff Bezos says this business is becoming Amazon’s next ‘pillar’ A rallying cry for Seattle tech

Watch: A venture capitalist’s passionate speech, a rallying cry, really, about Seattle Seattle’s AI2 Incubator rebrands as AI House, and adds key investor as managing director ‘I’m tired of that narrative’: Seattle VC pushes back on tech exodus talk The Washington tech ecosystem

New map traces Washington state’s tech ‘universe’ to a few key hubs, and shows what’s at risk After hiring AWS exec and raising $107M seed round, Virginia startup plants flag in Seattle area GeekWire’s Seattle engineering centers list Subscribe to GeekWire in Apple Podcasts, Spotify, or wherever you listen.

Previous StorySeattle Tech Week notebook: AI, startups, and the best insights and takeaways we heard

New York, New York--(Newsfile Corp. - August 1, 2026) - WHY: Rosen Law Firm, a global investor rights law firm, reminds purchasers of common stock of Microsoft Corporation (NASDAQ: MSFT) between May 1, 2025 and January 28, 2026, inclusive (the "Class Period"), of the important August 11, 2026 lead plaintiff deadline.

SO WHAT: If you purchased Microsoft common stock during the Class Period you may be entitled to compensation without payment of any out of pocket fees or costs through a contingency fee arrangement.

WHAT TO DO NEXT: To join the Microsoft class action, go to https://rosenlegal.com/cases/microsoft-corporation/join or call Phillip Kim, Esq. toll-free at 866-767-3653 or email [email protected] for information on the class action. A class action lawsuit has already been filed. If you wish to serve as lead plaintiff, you must move the Court no later than August 11, 2026. A lead plaintiff is a representative party acting on behalf of other class members in directing the litigation.

WHY ROSEN LAW: We encourage investors to select qualified counsel with a track record of success in leadership roles. Often, firms issuing notices do not have comparable experience, resources, or any meaningful peer recognition. Many of these firms do not actually handle securities class actions, but are merely middlemen that refer clients or partner with law firms that actually litigate the cases. Be wise in selecting counsel. The Rosen Law Firm represents investors throughout the globe, concentrating its practice in securities class actions and shareholder derivative litigation. Rosen Law Firm has achieved the largest ever securities class action settlement against a Chinese Company. Rosen Law Firm was Ranked No. 1 by ISS Securities Class Action Services for number of securities class action settlements in 2017. The firm has been ranked in the top 4 each year since 2013 and has recovered billions of dollars for investors. In 2019 alone the firm secured over $438 million for investors. In 2020, founding partner Laurence Rosen was named by law360 as a Titan of Plaintiffs' Bar. Many of the firm's attorneys have been recognized by Lawdragon and Super Lawyers.

DETAILS OF THE CASE: According to the lawsuit, throughout the Class Period, defendants made false and/or misleading statements and/or failed to disclose that: (1) Microsoft's Copilot family of products had experienced significant brand positioning, user experience, usage, data siloing, computational capacity, organizational, and interoperability problems; (2) Microsoft's flagship proprietary AI model ranked well below competitors on a number of benchmark tests; (3) Microsoft needed to increase by billions of dollars its capital expenditures and divert graphics processing unit ("GPU") and central processing unit ("CPU") capacity away from fulfilling demand for its profitable Azure services in order to improve the competitive positioning of its critical Copilot family of products and increase its AI-related research and development ("R&D"); and (4) as a result, Microsoft had failed to convert a significant percentage of its commercial Microsoft 365 users to paid Copilot subscriptions and Microsoft's Copilot offerings had lost market share to rival products, a trend that was increasing. When the true details entered the market, the lawsuit claims that investors suffered damages.

To join the Microsoft class action, go to https://rosenlegal.com/cases/microsoft-corporation/join or call Phillip Kim, Esq. toll-free at 866-767-3653 or email [email protected] for information on the class action.

No Class Has Been Certified. Until a class is certified, you are not represented by counsel unless you retain one. You may select counsel of your choice. You may also remain an absent class member and do nothing at this point. An investor's ability to share in any potential future recovery is not dependent upon serving as lead plaintiff.

Follow us for updates on LinkedIn: https://www.linkedin.com/company/the-rosen-law-firm, on Twitter: https://twitter.com/rosen_firm or on Facebook: https://www.facebook.com/rosenlawfirm/.

Attorney Advertising. Prior results do not guarantee a similar outcome.

-------------------------------

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/307580

Source: The Rosen Law Firm PA

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Analyst’s Disclosure: I/we have a beneficial long position in the shares of MSFT either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Earnings season is in full swing, and recently, the three largest hyperscalers released their quarterly updates. Of course, we are talking about the "Big Three" in the cloud computing industry: Amazon (AMZN +15.32%), Microsoft (MSFT +3.02%), and Alphabet (GOOG +6.88%) (GOOGL +6.73%). The market was more than satisfied with the first two: Amazon and Microsoft experienced massive post-earnings jumps. It wasn't the case for Alphabet, as the company dipped following its update.

With their earnings in the books, now is as good a time as any to review their investment theses, particularly as it pertains to their positions in the cloud computing market, which should provide them with a powerful long-term tailwind. Which of the three is the best cloud stock to buy right now?

Image source: The Motley Fool.

Similarities and differences The services Amazon, Microsoft, and Alphabet offer through their respective cloud computing businesses overlap significantly. They all let their customers rent computing power, storage, and software tools instead of building their own data centers, resulting in meaningful cost savings and productivity gains. However, there are differences. Amazon was the industry pioneer and arguably has the broadest cloud platform. Microsoft is particularly attractive to enterprises that already use its products.

Alphabet stands out for its expertise in certain niches, including data analytics and machine learning. This isn't the whole story, but it's a basic overview of where their services diverge. It's also worth pointing out that Amazon has the largest market share, followed by Microsoft.

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However, Alphabet is currently growing its cloud computing sales much faster than its peers. In the second quarter, Google Cloud revenue grew 82% year over year. By comparison, Amazon Web Services' (AWS) sales increased by 37% from the year-ago period, and Microsoft Azure climbed 43% year over year (it was the fourth quarter of its fiscal year 2026, ending June 30). Further, while all three experienced accelerating revenue growth in this segment, Google Cloud's was much more impressive, going from 63% in the first quarter to 82% this time around. AWS' sales climbed by 28% in the first quarter, while Microsoft Azure increased 40% in the company's previous period.

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Advantage, Alphabet? Google Cloud is growing faster not just because it is smaller, although that's part of it. But beyond that, a disproportionate number of businesses seem to be choosing Google Cloud to build and run artificial intelligence (AI) applications, making the company one of the big winners of the AI boom. Google Cloud should continue to maintain its faster growth rate, and there are additional arguments in favor of Alphabet. The company dominates its core market of digital advertising. It has a near-monopoly in the internet search category, and its video-sharing platform, YouTube, is an industry leader.

Further, it boasts a wide moat thanks to deep network effects in search. Amazon may be the top player in e-commerce, but it isn't nearly as dominant as Alphabet is in internet search, and its core e-commerce operations are fairly low-margin, whereas advertising is a high-margin business. There is another reason to prefer Alphabet over its two peers right now: Valuation.

GOOG PE Ratio (Forward) data by YCharts

For context, the average forward price-to-earnings ratio in the S&P 500 right now is 19.4. Alphabet looks like a bargain by comparison. There are, of course, some risks to consider. Notably, Alphabet is now projecting capex between $195 billion and $205 billion for the fiscal year 2026, up from its prior range of $180 billion to $190 billion. The company is spending so much to fuel its AI-related ambitions that its free cash flow in the second quarter turned negative, a first in its history as a publicly traded company.

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Some investors worry that Alphabet's spending will come back to haunt it if AI infrastructure spending slows down significantly. That is certainly a possibility, but my view is that Alphabet will continue to capitalize on AI, at least in the medium term. The company ended the second quarter with $514 billion in cloud backlog, partly thanks to its booming AI business. So, Alphabet is the best cloud computing stock to buy right now, given that it is growing faster than its peers, has a stronger position in AI, trades at a more reasonable valuation, and dominates its core, non-AI business. That said, investors can't go wrong with any of these three major hyperscalers. They should all deliver excellent long-term returns.

Microsoft (MSFT +3.02%) had itself a day on Thursday. Shares of the software giant jumped 15.5% to $451.10 following its fiscal fourth-quarter report. It was the stock's biggest one-day percentage gain since 2008, and it added about $450 billion of market value in a single session.

The report earned the reaction. The quarter (ended June 30) delivered $90.0 billion of revenue, up 18% year over year. And the star was the cloud. "Azure and other cloud services" revenue climbed 43%, an acceleration from the fiscal third quarter's 40%.

But one historic Thursday is a strange way to measure this company. To me, the better measurement starts on Feb. 4, 2014, the day Satya Nadella took over as CEO.

So, after a week like this one, what would a $10,000 investment made on Nadella's first day be worth now?

Image source: Microsoft Corporation.

From $36.35 to $451.10 Microsoft stock closed at $36.35 on the day Nadella became CEO. At Thursday's close of $451.10, the shares have grown to about 12 times their starting price. That alone turns a $10,000 investment into about $124,000.

And the real result is better. Microsoft has paid a dividend every quarter of Nadella's tenure, raising its quarterly payout from $0.28 per share when he arrived to $0.91 today (a yield of about 0.8% at the current price). Reinvest each of those payments along the way, and the original $10,000 grows to about $150,000.

For perspective, the S&P 500 roughly quadrupled over the same stretch. The same $10,000 in an index fund, dividends reinvested, would be worth about $52,000. Microsoft delivered nearly three times the market's result -- while being one of the largest companies in the world the entire time.

What did shareholders get for their patience? A different company. In fiscal 2014, the year Nadella arrived, Microsoft's revenue was $86.8 billion, and Windows still defined the business. In fiscal 2026, which ended in June, revenue was $331.8 billion, with operating income climbing 21% year over year.

Even more telling, Azure (the cloud computing platform Nadella bet the company on) crossed $100 billion of annual revenue for the first time. The cloud business alone now brings in more revenue in a year than the entire company did when he started.

"Azure revenue surpassed $100 billion for the first time, and Microsoft 365 Copilot reached over 30 million paid seats," Nadella said in the company's fourth-quarter earnings release.

Would I buy Microsoft today? A backtest can't be repeated, though. Anyone buying now is buying the next stretch, and Wednesday's report offers a fair amount to go on.

For the full fiscal year, revenue rose 18% while earnings per share climbed 32% year over year to $17.95. Full-year net income grew 31%, too. And the fourth quarter closed the year strong, with net income of $35.8 billion coming in 31% higher than a year earlier.

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Also worth noting: management guided for Azure growth of about 45% in constant currency in the current quarter, which would be an acceleration from an already accelerating pace. Azure grew 40% in fiscal Q3 and 43% in fiscal Q4. And Microsoft's commercial remaining performance obligations (contracted work customers have signed up for but the company hasn't yet delivered) reached $678 billion, up 84% year over year.

Then there's the price. At $451.10, the price tag works out to about 25 times earnings. Set that against 18% revenue growth and earnings per share rising 32%, and the multiple arguably looks reasonable. It doesn't require the next 12 years to look like the last 12, either. Good thing, because they almost certainly won't. A company already worth $3.4 trillion can't repeat a 12-fold run with the same ease.

Of course, the risks have grown with the company. Microsoft is spending heavily on data centers, and the more it builds, the more its future earnings depend on cloud demand outpacing capacity. If Azure's growth cooled sharply while that spending kept climbing, the stock could take a hit.

Still, the lesson of the Nadella era isn't that Microsoft got lucky. It's that a dominant business, repositioned around the right opportunity and, given time, can compound in a way that makes even a record Thursday look small. As for me, I'd still buy Microsoft at this price. Sure, the next 12 years likely won't look as good as the last, but I think they'll look decent.

Key Takeaways More than 300 S&P 500 members have reported Q2 results so far. Tech continues to be a huge contributor to the overall growth pace.Nvidia reflects the last Mag 7 member yet to report, with results expected in late August. We are past the halfway mark of the Q2 earnings season, with more than 60% of S&P 500 companies having already reported. With another 27% of the index on deck this week, we will have seen the bulk of Q2 earnings by Friday.

While the spotlight has recently been on blockbuster results from the Magnificent Seven, this week’s lineup offers a diverse mix of broad-market leaders. Reports will span legacy operators like Disney, Eli Lilly, and Caterpillar, as well as gig-economy mainstays like Uber, DoorDash, and Airbnb.

The Q2 earnings season continues to validate our constructive view on corporate fundamentals. Rather than simply clearing reduced consensus hurdles, reporting companies are offering encouraging reads on order trends, margin resilience, and full-year demand. This fundamental health is filtering directly into analyst models, driving a steady stream of upward revisions for Q3 and future quarters, as the following chart highlights.

Image Source: Zacks Investment Research

Crucially, these favorable revision patterns are not a new development; they extend a tailwind that has been building for nearly a year. Historically, these upward adjustments were tightly concentrated in Technology and, more recently, Energy, following Middle East supply disruptions. However, for Q3 2026, the constructive estimate revisions have broadened significantly, rising across 8 of the 16 Zacks sectors—including Transportation, Finance, Aerospace, Industrials, Utilities, and Construction alongside Tech and Energy.

As would be expected, estimates for full-year 2026 are also going up, as the chart below shows.

Image Source: Zacks Investment Research

The Magnificent 7 Earnings PerformanceMicrosoft (MSFT - Free Report) and Amazon (AMZN - Free Report) became the latest "Magnificent Seven" members to deliver results that earned market applause, following Alphabet’s (GOOGL - Free Report) blowout report earlier in the cycle. All three tech giants remain deeply committed to building out generative AI infrastructure—an ongoing multi-billion-dollar CapEx push that has occasionally sparked broader market anxiety over ROI timing.

Cloud segment performance has emerged as the definitive barometer for whether these aggressive AI outlays are yielding tangible commercial returns. On that front, all three hyperscalers delivered robust top-line momentum, led by Alphabet’s standout, industry-leading acceleration.

With Q2 results from 6 of the Mag 7 members out already (Nvidia reports results on August 26th), blended quarterly earnings for the group are on track to be up +85.5% from the same period last year on +27.5% higher revenues. This group pace reflects actual results for the 6 Mag 7 members that have reported, with estimates for the still-to-come Nvidia report.

Image Source: Zacks Investment Research

Keep in mind that the group’s blockbuster Q2 tally has benefited from Alphabet’s non-operating unrealized gain on its SpaceX stake, which accounted for an estimated $77.4 billion in the company’s $112.1 billion net income. The Q2 earnings growth pace for the Mag 7 group becomes a relatively more ‘reasonable’ +30.3% once Alphabet’s non-operating unrealized gain is stripped out.

The chart below shows the Mag 7 group’s earnings and revenue growth on a calendar year basis.

Image Source: Zacks Investment Research

Importantly, the Mag 7 group has consistently enjoyed a steadily improving earnings outlook, with analysts raising their estimates, as the chart below shows.

Image Source: Zacks Investment Research

It is useful to keep in mind that the Mag 7 group is on track to bring in more than 29% of all S&P 500 earnings this year, up from 16.4% of the total in 2020, and accounts for 32.7% of the index’s market capitalization.

Q2 Earnings Season ScorecardThrough Friday, July 31st, we have seen quarterly results from 307 S&P 500 members or 61.4% of the index’s total membership. Total earnings for these companies are up +46.7% from the same period last year on +14.7% revenue gains, with 83.1% of the companies beating EPS estimates and 76.2% of them beating revenue estimates.

The comparison charts below put the Q2 earnings and revenue growth rates for these index members in a historical context.

Image Source: Zacks Investment Research

The comparison charts below put the Q2 EPS and revenue beats percentages in a historical context.

Image Source: Zacks Investment Research

The unusually strong earnings growth rate of +46.7% and revenue growth of +14.7% are benefiting from Micron and Alphabet’s blockbuster results.

The chart below shows the reported Q2 earnings growth pictures, with and without Alphabet and Micron.

Image Source: Zacks Investment Research

We have another very busy week on the reporting docket, with more than 1,200 companies on deck to report results, including 136 S&P 500 members.

The Earnings Big Picture

The chart below gives you a big-picture view of the overall earnings picture. It highlights current Q2 expectations right alongside actual results from the past four quarters and forecasts for the next three (including 2026 Q2).

Image Source: Zacks Investment Research

As you can see here, total S&P 500 earnings for 2026 Q2 are expected to increase by +40.8% compared to the same period last year on +13.8% higher revenues.

Of the 16 Zacks sectors, 13 are expected to have positive earnings growth in Q2, with Energy (earnings growth of +128%), Tech (+92.8%), Basic Materials (+53.1%) and Finance (+21.5%) as the major growth drivers.

Q2 earnings growth drops to +15.9% from +40.8% once the Tech sector’s substantial contribution is excluded.

The +128% earnings growth for the Energy sector is meaningful, but aggregate earnings growth would still be +36.9% on an ex-Energy basis.

The Tech sector has been a pillar of earnings growth over the last two years, and the sector is expected to continue playing that role in Q2 and beyond. The chart below shows current earnings and revenue growth expectations for the sector relative to what the sector actually reported in the preceding two periods and what is expected in the following three quarters.

Image Source: Zacks Investment Research

The Tech sector is unlike the other 15 Zacks sectors, as it alone brings in 41.2% of all S&P 500 earnings and accounts for 45.4% of the index’s total market capitalization.

As noted earlier, Alphabet’s Q2 results included a huge boost from a non-operating side, specifically the unrealized gain it has been forced to book on its SpaceX stake following that company’s IPO. Alphabet isn’t alone in having an outsized impact on the sector’s growth pace, as Nvidia and Micron are also exerting an outsized influence.

Excluding the contribution from Alphabet, Micron and Nvidia, Q2 earnings for the rest of the Zacks Tech sector would be up +30.3% (vs. +92.8% otherwise).

The chart below shows the Tech sector’s earnings growth picture with and without these three companies.

Image Source: Zacks Investment Research

The chart below shows the aggregate growth picture for the S&P 500 index on a calendar year basis.

Image Source: Zacks Investment Research

As with Q2 expectations, the Tech sector has an outsized impact on the annual earnings picture as well. Total Tech sector earnings are expected to increase +49.9% from the same period last year on +16.6% higher revenues.

Excluding the Tech sector’s substantial contribution, total S&P 500 earnings for the year would be up +13.4% (vs. +25.9% otherwise).

As we saw with Q2 expectations, contributions from Alphabet, Micron, and Nvidia are also significant here, as the chart below shows.

Image Source: Zacks Investment Research

The way to read this chart is that the +25.9% earnings growth expected in 2026 drops to +13.4% once the Tech sector is excluded and +15.3% once only Alphabet, Nvidia, and Micron are excluded from the index. In other words, one-third of all S&P 500 earnings growth in 2026 is coming from these three Tech companies.

For a detailed view of the evolving earnings picture, please check out our weekly Earnings Trends report here >>>> Q3 Estimates Increase for Tech & Finance and Fall for Staples

Dan Ives breaks down his biggest takeaways from this week's Big Tech earnings, arguing that AI is still in the "third inning" with only about 5% of companies currently paying for AI adoption. He explains why earnings season continues to validate the long-term AI growth story, weighs the market's reaction to the results, and analyzes the post-earnings rallies in Microsoft (MSFT) and Amazon (AMZN).

The latest earnings snapshot showed a 14th straight "double beat," with quarterly revenue of $90.01 billion (+18%) and EPS of $4.74 topping consensus. The overall cloud revenue rose 27% to $59.3 billion.

Intelligent Cloud revenue climbed 32% to $39.3 billion, and Azure and other cloud services revenue grew 43%, helping frame why buyers are still willing to pay up for the AI/cloud story.

BNP Paribas analyst Stefan Slowinski said Microsoft strengthened its position as a leading AI beneficiary after fiscal fourth-quarter results showed progress across Azure, Microsoft 365 Copilot, GitHub Copilot and AI infrastructure.

AI Monetization Gains TractionSlowinski said Microsoft’s fiscal fourth-quarter results addressed nearly every major investor concern going into the report and helped shift sentiment around the stock.

The analyst said Azure again outperformed, while Microsoft also showed more tangible AI monetization across the software stack through Microsoft 365 Copilot and GitHub Copilot, as well as across the infrastructure stack through Azure.

He said Microsoft now has several potential upside drivers, including broader use of usage-based pricing in Microsoft 365 Copilot, more E7 attach opportunities, higher GPU rental pricing and stronger OpenAI momentum in July.

Azure Growth Could AccelerateSlowinski said Microsoft’s fiscal first-quarter 2027 Azure guidance of 45% reinforces the company’s acceleration path.

The analyst said Azure growth could move toward the high-40% range by the second quarter of fiscal 2027 as more AI capacity comes online and demand remains strong.

He raised his fiscal 2027 constant-currency Azure estimate to about 44% from roughly 41%. He said that forecast assumes only modest growth in quarterly net new Azure revenue in the second half of fiscal 2027.

On capital spending, Slowinski said Microsoft maintained its calendar 2026 cash capex outlook, but he now forecasts about $220 billion of capex in fiscal 2027, down from his prior $260 billion estimate.

The analyst linked the lower forecast partly to accounting lease changes and management’s commitment to remain free-cash-flow positive in fiscal 2027.

Price Forecast Stays At $549Slowinski reiterated an Outperform rating and kept his $549 price forecast, implying 22% upside from the July 30 price of $451.10.

The analyst said BNP made modest EPS estimate changes to reflect a slightly higher tax rate and management’s fiscal 2027 operating-margin commentary.

He values Microsoft using a sum-of-the-parts framework with a 25-times fiscal 2028 price-to-earnings multiple and includes the company’s stake in OpenAI.

Top ETF ExposureSignificance: Because MSFT carries such a heavy weight in these funds, any significant inflows or outflows for these ETFs will likely force automatic buying or selling of the stock.

Price ActionMSFT Stock Price Activity: Microsoft shares were up 2.54% at $462.56 at the time of publication on Friday, according to Benzinga Pro data.

Photo: Shutterstock

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31.7.2026 19:46

Americké akciové trhy se dnes obchodují v oscilačním módu, když silné výsledky Amazonu a pokračující zájem o téma AI narážejí na jestřábí komentáře představitelů Fedu, růst výnosů a výrazný propad Applu. Amazon posiluje takřka 15 % po nejrychlejším růstu tržeb za více než čtyři roky a navázal tak na pozitivně přijaté výsledky Microsoftu (MSFT +2,72 %) a Alphabetu (GOOG +6,14%), které investorům dodaly větší důvěru, že vysoké investice do umělé inteligence začínají přinášet viditelný efekt. Naopak Apple ztrácí nebývale vysoká % po varování, že růst zasáhnou omezení v dodávkách, a zároveň přetrvávají obavy z dopadu vyšších cen iPhonů. Tržní náladu brzdí nejistota kolem sazeb poté, co Fed tento týden ponechal základní sazbu beze změny, ale několik představitelů centrální banky veřejně podpořilo potřebu dalšího zvýšení sazeb kvůli inflačním rizikům. Makrodatem dnešního dne byl červnový Index spotřebitelské důvěry University of Michigan, ktrerý předčil očekávání. 

Z hlediska sektorů dnes nejvíce vyniká zbytná spotřeba, která díky prudkému růstu Amazonu přidává kolem 5 %, zatímco technologický sektor ztrácí přes 1,6 % pod tlakem Applu. Polovodiče se po slabém červenci stabilizují jen částečně; Philadelphia Semiconductor Index je dnes poblíž nuly, ale za celý měsíc ztrácí zhruba 20 %, což by znamenalo nejhorší měsíční pokles od roku 2008. Naopak širší trh mimo největší technologické tituly působí odolněji, když rovnoměrně vážený index S&P 500 míří ke čtvrtému měsíčnímu růstu v řadě. Výnos dvouletého amerického dluhopisu vzrostl o 7 bazických bodů na 4,29 % a desetiletý výnos posílil o 6,35 bodu na 4,727 %, nejvýše od ledna 2025; třicetiletý výnos se dostal na 5,2584 %, tedy nejvýše od poloviny roku 2007. Ropa v červenci výrazně rostla a dnes znovu zdražuje kvůli narušené dopravě přes Hormuzský průliv, zatímco zlato klesá o 1,52 % na 4 040,70 USD za unci.

Z jednotlivých titulů dominuje Amazon, jehož výsledky znovu přitáhly kapitál do AI a cloudového tématu, protože silný růst cloudu zmírnil obavy z vysokých kapitálových výdajů. Microsoft přidává nadále roste po předchozím rekordním jednodenním růstu a výhledu silné tvorby hotovosti do fiskálního roku 2027, roste Alphabet i Meta. V polovodičích posiluje Nvidia (NVDA +2,2 %), zatímco Monolithic Power Systems (MPWR +8,52 %) skáče po výhledu tržeb pro třetí kvartál nad odhady analytiků. Na opačné straně stojí Apple s poklesem o 9,6 % kvůli varování před dopadem dodavatelských omezení a GoDaddy, který propadá o 20 % po zúžení celoročního výhledu tržeb. Výsledky reportoval Exxon (XOM -1,64 %), který navyšuje produkci avšak potíže v Hormuzu výsledky kazí. Mimo USA zaujal jihokorejský KOSPI růstem o 17,91 %, když se prudce odrazil po předchozích ztrátách a stal se symbolem extrémních výkyvů nálady vůči AI a polovodičovým akciím.

Index S&P 500 roste o 0,46 % na 7471,98 b.
Index Dow Jones roste o 0,48 % na 52438,21 b.
Index Nasdaq Composite roste o 0,43 % na 25277 b.

Nejsilnější sektory S&P Změna Nejslabší sektory S&P Změna Nezbytná spotřeba +5,9 % Základní materiály -2,6 % Sektor komunikací +3,8 % Informační technologie -1,1 % Průmysl +1 % Zdravotní péče -0,5 % Nejsiln ější akcie S&P Změna Nejslabší akcie S&P Změna Amazon.com (AMZN) +15 % GODADDY I (GDDY) -21 % Dexcom (DXCM) +11 % COINBS GBL A O (COIN) -12 % Monolithic Power Systems (MPWR) +9,2 % Corteva (CTVA) -11 % VERTIV HLD A O (VRT) +8,2 % Apple (AAPL) -9,7 % Eaton (ETN) +7,2 % Stryker (SYK) -6,7 % Zdroj: Reuters

Martin Varecha
Fio banka, a.s.
Prohlášení

Artificial intelligence has become one of the market’s defining investment themes, but the conversation often centers on chipmakers or AI start-ups chasing the next breakthrough. 

This earnings season told a different story. Amazon (NASDAQ:AMZN | AMZN Price Prediction), Alphabet (NASDAQ:GOOG), and Microsoft (NASDAQ:MSFT) demonstrated that the companies building the infrastructure behind AI are already converting demand into revenue, cash flow, and profits. Their latest quarterly results suggest the AI boom isn’t cooling — it’s becoming embedded in how businesses operate. 

That distinction matters because investors aren’t betting on an uncertain future anymore. Increasingly, they’re investing in demand that already exists.

The Backlog Is the Story Investors Should Be Watching Combined cloud backlog across Microsoft, Amazon, Alphabet, and Oracle (NYSE:ORCL) has expanded from roughly $800 billion a year ago to more than $2.3 trillion today. Those aren’t hopeful sales forecasts. They represent signed customer commitments stretching years into the future. Even more interesting is when those contracts renew.

Much of today’s backlog was negotiated before AI infrastructure became scarce and before computing prices began climbing. Over the next two years, a large portion of those agreements will come up for renewal in a market where GPU capacity has become one of the world’s most valuable commodities.

Normally, technology gets cheaper over time. Instead, one-year rental prices for Nvidia‘s (NASDAQ:NVDA) H100 GPUs have climbed from roughly $1.70 per hour last October to about $2.77 per hour today — a 63% increase despite newer processors already entering the market. Reports from China show the same trend, with H100 rental prices rising another 20% to 30% as daily AI token usage surpassed 140 trillion, more than 1,000 times higher than just two years ago. Even Intel (NASDAQ:INTC) is able to sell “scrap” CPUs for a premium.

That’s almost unheard of in technology. Older hardware usually loses value. AI demand has flipped that equation.

Forget the hype—$2.3 trillion in signed contracts prove the AI boom is just getting started. Meet the 'toll collectors' turning massive infrastructure demand into guaranteed revenue. © 24/7 Wall St. Demand Is Already Outrunning Supply Microsoft highlighted the industry’s biggest advantage during its earnings call. CFO Amy Hood said the company remains capacity constrained, meaning customers want more AI computing than Microsoft can currently provide. Google said the same thing. That’s a luxury few capital-intensive businesses ever experience.

That helps explain why combined 2026 capital spending plans for the four hyperscalers now total roughly $740 billion to $770 billion, nearly double what they invested the previous year.

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Granted, massive capital spending usually makes investors nervous because companies often build capacity hoping customers eventually arrive, but this cycle looks different. These companies are spending against contracts that have already been signed, removing a large portion of the execution risk that normally accompanies aggressive expansion.

Why These Three Hyperscalers Stand Above the Rest If those trillions of dollars in backlog renew at today’s higher pricing while customer usage continues climbing, the economics become compelling.

The data centers, networking equipment, and software platforms are already being built. Higher pricing on existing infrastructure can flow through to profits much faster than new construction costs rise. That kind of operating leverage rarely appears in businesses spending hundreds of billions of dollars annually.

Oracle has benefited from the same AI demand, but it remains the outlier. Its cloud business has expanded rapidly, yet the company has relied much more heavily on debt to finance its infrastructure buildout than Amazon, Alphabet, or Microsoft. That increases financial risk if growth slows or construction timelines slip. Its stock has been nearly cut in half over the past year.

By contrast, the three larger hyperscalers generate enormous free cash flow that helps fund expansion internally. Amazon’s stock is up 15% just today after yesterday’s earnings, while Microsoft soared 15% yesterday. Alphabet has gained 80% in the last 12 months.

Key Takeaway In short, the latest earnings reports reinforce that Amazon, Alphabet, and Microsoft aren’t simply participating in the AI revolution — they’re becoming its toll collectors. Their cloud businesses already generate tens of billions of dollars in annual operating income, yet a $2.3 trillion backlog, rising compute prices, and supply-constrained demand suggest those profits may accelerate faster than many investors expect. 

AI leadership isn’t guaranteed, and competition remains fierce. But unlike many AI investments built on future possibilities, these companies are expanding to serve demand that customers have already committed to buying. For long-term investors, that may make today’s hyperscalers some of the safest — and potentially most rewarding — ways to invest in artificial intelligence.

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Contact [email protected] for any questions or corrections.

by Todd Bishop on Jul 31, 2026 at 8:28 amJuly 31, 2026 at 8:33 am

The number of product research and development roles at Microsoft declined for the second straight year, according to the company’s annual regulatory filing, offering a new indication of how the tech giant is reshaping its workforce in the AI era.

Microsoft’s total headcount declined by 5,000 people to 223,000 as of June 30, according to its Form 10-K, filed with the SEC this week. It’s the first annual employment decline for Microsoft since 2016, when the company was writing off and winding down its Nokia smartphone business.

The trend is notable in part because, over the same time period, Microsoft’s revenue rose 18%, or $50.1 billion, to $331.8 billion — the largest one-year increase in the company’s history.

Here’s how the employment trends break down:

Product R&D roles represented the majority of the net decline, falling by 3,000, to 77,000 — down from a peak of 81,000 in 2024. Operations roles, now Microsoft’s largest employment category, held steady at 89,000 after growing by 3,000 the year before. It includes datacenter operations, product support, consulting, and manufacturing and distribution. Sales and marketing roles declined by 1,000, to 43,000, and general and administration by 1,000, to 14,000. The reductions fell disproportionately on Microsoft’s U.S. workforce, which declined by 4,000, to 121,000. International employment declined by 1,000, to 102,000. The numbers reflect the roughly 9,000 jobs Microsoft cut on July 2, 2025, two days into its fiscal year. They do not reflect the 4,800 cuts announced July 6 of this year — spanning sales, consulting and Xbox — or the thousands of U.S. employees who left in early July under the company’s first voluntary retirement program.

On the earnings call Wednesday, CFO Amy Hood confirmed that “total company headcount declined 2% year over year.” She linked a 10% increase in operating expenses to “continued investment in R&D compute capacity, talent, and data to support product development across the portfolio.”

AI coding tools — including Microsoft’s own GitHub Copilot — have become a standard part of how software is built at Microsoft and across the industry, reducing the number of people and the amount of time it takes to ship products, while often expanding the total scope of the work.

Microsoft has repeatedly declined to link its job cuts to AI. Chief People Officer Amy Coleman said in a memo earlier this month that the roles being eliminated were not being directly replaced by AI, while acknowledging that “AI is changing how work gets done.”

Tech companies have been keeping a tighter rein on operating expenses, primarily through job cuts, in part to offset soaring capital expenses to support their AI infrastructure buildouts. Microsoft’s capex reached $41 billion in the June quarter alone.

Microsoft is also moving engineers out of product development and into customer-facing roles. The Microsoft Frontier Company, a $2.5 billion initiative announced July 2, brings together more than 6,000 people to embed engineers inside customers building AI systems — a group drawn “primarily from Microsoft’s existing engineering and forward-deployed teams,” according to the company.

© lcva2 / iStock Editorial via Getty Images

Microsoft (NASDAQ:MSFT | MSFT Price Prediction) at $451.10 screens as attractive on the fundamentals. The earnings surge that pushed shares up more than 15% matters less than what fiscal Q4 revealed about Microsoft’s cloud franchise durability at a moment the market had priced in AI capex fatigue.

Microsoft runs three segments: Intelligent Cloud (Azure and server products), Productivity and Business Processes (Microsoft 365, LinkedIn, Dynamics), and More Personal Computing (Windows, Xbox). Cloud and AI now drive results. Azure crossed $100 billion in annual revenue this fiscal year while still growing 43% year over year. That is the growth profile of a company one-tenth Microsoft’s size.

Shares spent most of 2026 on the defensive. Even after the pop, MSFT trades below where it started the year, having lagged as investors questioned whether the $115.95 billion capex bill would earn its keep. Q4 supplied the answer.

The Backlog Nobody Else Has Commercial remaining performance obligations jumped 84% year over year to $678 billion. That is a revenue floor equal to roughly two years of current sales already contracted, removing most demand uncertainty that hangs over other AI infrastructure names. Q4 revenue of $90.01 billion beat consensus by 2.71%, with EPS of $4.74 topping estimates by 11.81% and marking the fifth straight beat.

Copilot passed 30 million paid seats, giving Microsoft the clearest enterprise AI monetization footprint of any hyperscaler. Margins remain best in class at 67.94% gross, 46.78% operating, and 40.31% net. The setup is straightforward: a $678 billion backlog attached to a business that has rerated lower even as growth accelerated.

The Capex Weight and the Cash Flow Hole The bear case is direct. Full-year capex hit $115.95 billion, more than double the prior year, and free cash flow fell 23.19% despite record operating cash. A $3.2 billion gain from the Anthropic stake flattered Q4 EPS. Cash and equivalents dropped 30.78% year over year to $20.9 billion. If Azure growth normalizes before data centers earn returns, a P/FCF of 50 becomes hard to defend.

Prediction markets flag fatigue. Polymarket traders assign only a 24.3% probability of MSFT closing above $450 for the month and a 56% probability the stock finishes lower on the day. The one-year return sits at -11.4%.

Why Patience Has a Case Shares just ran 20.93% in a month and 18.22% in a week. Digestion is likely, and forward comps get harder as Azure prints against its own $100 billion base. Waiting a quarter or two would clarify whether RPO converts to reported revenue at the pace bulls expect and whether More Personal Computing (down 4% in Q4) stabilizes. That patience has a real cost if the rerating continues.

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The Numbers Behind the Rerating Microsoft trades at $451.10 for a market cap near $3.35 trillion. The consensus 12-month price target sits around $558.64 with a Moderate Buy rating from 34 covering analysts, implying meaningful upside. The P/E ratio is 25, reasonable for a business that grew full-year revenue 17.79% and net income 31.34%.

MSFT is down 6.31% year to date against an S&P 500 up roughly 8.6% and a Nasdaq-100 up 18.10%. That underperformance makes today’s setup interesting.

Why the $451 Setup Looks Compelling At $451.10, Microsoft looks attractively positioned. RPO conversion should drive high-teens revenue growth through fiscal 2027, Azure is still accelerating at 43%, and Copilot’s 30 million paid seats represents a monetization curve rather than saturation.

The valuation gap with slower growers is the anomaly. Apple (NASDAQ:AAPL) trades near $333.43 after posting 16.36% revenue growth, yet commands a premium multiple relative to Microsoft’s roughly 25x on faster growth and a contracted backlog Apple cannot match. Buying an 18% grower at 25x while the market pays up for slower compounders is the setup value investors typically wait years to see.

The thesis breaks if Azure growth drops below 30% or if Q1 FY27 shows material RPO decline. Current data signals neither risk. Capex remains a real risk, but a $678 billion contracted backlog reflects clear demand visibility.

Investors who wait for the perfect entry after a 15% pop often get penalized. Microsoft is compounding faster than the market is pricing, with the clearest revenue visibility in mega-cap tech, and that combination makes $451 a level worth watching closely.

Act now: the analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and Microsoft didn't make the cut. Grab the names FREE today.

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SummaryMicrosoft Corporation delivered record Q4 revenue of $90B, with operating income up 18%, maintaining margins despite heavy AI infrastructure costs.Azure revenue surpassed $100B annually, growing 41% for the year, with MSFT management guiding for 45% constant-currency growth in Q1’27.Commercial remaining performance obligations surged 84% to $678B, signaling robust, diversified demand beyond AI model developers and undermining circular-money bear arguments.Despite a 23% drop in free cash flow and accelerating CapEx, MSFT remains a Strong Buy due to visible, contracted demand underpinning aggressive infrastructure investment. tupungato/iStock Editorial via Getty Images

Microsoft Corporation (MSFT) wrapped up fiscal 2026 with a quarter that was beyond Wall Street's expectations, and the stock popped almost 16% on the news. Admittedly, Microsoft's beats are becoming much of a quarterly

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Analyst’s Disclosure: I/we have a beneficial long position in the shares of MSFT either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Bohdan Kucheriavyi is not a financial/investment advisor, broker, or dealer. He's solely sharing personal experience and opinion; therefore, all strategies, tips, suggestions, and recommendations shared are solely for informational purposes. There are risks associated with investing in securities. Investing in stocks, bonds, options, exchange-traded funds, mutual funds, and money market funds involves the risk of loss. Loss of principal is possible. Some high-risk investments may use leverage, which will accentuate gains & losses. Foreign investing involves special risks, including greater volatility and political, economic, and currency risks and differences in accounting methods. A security’s or a firm’s past investment performance is not a guarantee or predictor of future investment performance.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Microsoft (NASDAQ:MSFT | MSFT Price Prediction) just posted the kind of quarter that should have launched shares higher. Revenue of $90.01 billion grew 17.75%, Azure grew 43%, and full-year Azure revenue crossed $100 billion for the first time.

Yet MSFT is down 18.89% year to date. The disconnect is the story. So here is the question I want to answer: can Microsoft shares reach $625 in 2027?

Why Microsoft Shares Are Stuck Despite a Blowout Quarter Shares are down 23.2% over the last year and essentially flat on the week at 0.05%. The one-month move of 5.96% hints at a bottoming process, but the year has been ugly.

The reason is the capex bill. Q4 capital expenditures hit $35.80 billion, up 109.63% year over year, and full-year capex reached $115.95 billion. Free cash flow fell 23.19% in the quarter. That is why the market pulled back even after five straight EPS beats. With a beta of 1.13, MSFT amplifies any macro doubt about AI spending returns.

Wall Street Sees Big Upside. I Think They Are Still Too Cautious The consensus target sits at $557.25, with 13 strong buys, 41 buys, 3 holds, and zero sells. That is 95% bullish.

Citi raised the firm’s price target on Microsoft to $600 from $570 and keeps a buy rating on the shares while Piper Sandler raised the firm’s price target to $550 from $540 and keeps an Overweight rating. Our own model lands at a base case of $514.42, or 31.72% upside, with a bull case of $601.33 and confidence at 90%. Here is where I push back.

Analysts are backing into a target using a modest multiple and ignoring the operating leverage inside Azure. Earnings grew 23.4% year over year. When capex normalizes, that earnings power flows straight to the multiple.

The Path to $625 Per Share Reaching $625 from today’s price of $390.54 would require a gain of 60%. With forward EPS of $20.16, a price of $625 implies a forward P/E of 31x. Our base case of $514.42 already implies 23x, meaning the bold target requires 8x of additional multiple expansion.

Is that achievable? I think so, if a few things line up. The 1.149 adjustment factor in our model is driven by a 1.15 tech sector multiplier and that 95% bullish analyst consensus.

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Commercial RPO surged 84% to $678 billion, which is contracted revenue waiting to convert. Microsoft 365 Copilot crossed 30 million paid seats.

As CEO Satya Nadella put it, “This year, Azure revenue surpassed $100 billion for the first time, and Microsoft 365 Copilot reached over 30 million paid seats, reflecting the confidence customers are placing in us to power their AI transformation.”

If EPS grows another 20%+ into fiscal 2027, the multiple compresses naturally even as the price climbs. The primary risk is that capex keeps outpacing free cash flow and pressures margins.

Where Microsoft Trades Today vs Its Earnings Power At $390.54 against forward EPS of $20.16, MSFT trades at roughly 19x forward earnings. That is cheap for a company growing revenue 17.75% with a 46.3% operating margin.

Shares sit between a 52-week low of $349.20 and a high of $551.05. The 10-year return of 679.33% is a reminder that this business compounds through drawdowns. The valuation case is straightforward: you are paying a mid-teens growth multiple for accelerating AI revenue.

Is $625 Realistic? My Verdict Reaching $625 requires a 60% gain, and I will admit that is a stretch inside 12 to 18 months. It is not a long shot either.

For it to happen, Azure needs to hold growth north of 35%, capex needs to plateau so free cash flow reaccelerates, and Copilot seat additions need to keep compounding.

What derails it is a broader AI capex unwind if enterprises pause spending. Returns at this level shouldn’t be expected every year, but we’ve outlined the blueprint for how Microsoft could reach $625 in 2027.

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Contact [email protected] for any questions or corrections.

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I bought more Microsoft (NASDAQ:MSFT | MSFT Price Prediction) the morning after fiscal Q4 landed, and I would hit the button again tomorrow. This is a position I keep adding to, and the July 29, 2026 report is exactly why. Investors walked in braced for a capex figure that would blow the model up. CFO Amy Hood did the opposite. She revised calendar capex guidance down to roughly $175 billion from whisper numbers near $190 billion. The stock rose 15.51% in one session. My conviction comes from what that move reflected: discipline meeting demand.

Start with the demand. Azure grew 43% year over year and management guided 45% for next quarter, meaning enterprise cloud AI spending is still expanding. Azure crossed $100 billion in annual revenue for the first time. Commercial remaining performance obligations, the contracted work sitting on the books awaiting recognition, hit $678 billion, up 84% year over year. Microsoft 365 Copilot passed 30 million paid seats. When Satya Nadella talks about “the confidence customers are placing in us to power their AI transformation,” the RPO figure is the receipt.

Now the discipline. Q4 revenue landed at $90.01 billion, up 17.75%, beating estimates by 2.71%. Non-GAAP EPS printed $4.74 against a $4.24 estimate, an 11.81% beat, and the fifth consecutive one. Full-year operating income reached $155.24 billion, up 20.78%, net income $133.75 billion, up 31.34%, and operating cash flow $182.94 billion, up 34.35%. Return on equity is 34.04%. Interest coverage sits at 50.88x. Debt to equity is 0.29. This company generates enough cash internally to fund a $115.95 billion capex program while returning $12.7 billion to shareholders in a single quarter through dividends and buybacks.

Which brings me to why my money keeps flowing here instead of into Amazon or Alphabet, the two names a reader would reach for first. I have looked at both. I keep coming back because Microsoft has already handed me what I want a hyperscaler to prove: contracted future revenue of $678 billion, Azure accelerating from 43% to a 45% guide, and a CFO willing to trim the capex ask when the model tightens. Polymarket traders currently give Microsoft a 53.5% probability of holding a higher valuation than Anthropic and OpenAI combined by year-end. I treat that as the easier side of the bet.

The risk that could actually hurt this position is the capex itself. Free cash flow fell 23.19% in Q4 and 6.46% for the full year while capital spending grew 109.63% year over year. If AI demand softens, that outlay hits the P&L without a matching revenue tail. What keeps me buying anyway is the RPO. That figure represents signed customer commitments, and with net debt to EBITDA at 0.56 and interest coverage above 50x, this balance sheet absorbs the spend without straining. Retail sentiment on Reddit currently reads at 80, very bullish, which I note more as a mood check than a signal.

Trading around 25x earnings on a business compounding net income above 31%, with 34% ROE, and a balance sheet funding the largest AI infrastructure build in enterprise software, this is the retirement account holding I keep sizing up. I will keep buying Microsoft as long as the contracted demand keeps arriving faster than the capex bill does.

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Contact [email protected] for any questions or corrections.

Lo Toney z Plexo Capital si myslí, že investoři mění svá hodnocení čtvrtletních výsledků technologických společností. Dva technologičtí analytici Dan Ives a Gil Luria přijali pozvání na rozhovor ke Stevu Eismanovi a hovořili o řadě téma včetně návratnosti investic do AI. Steven Rattner z Willett Advisors si myslí, že Čína toho z USA nemusí mnoho kupovat, Spojené státy jsou na ní ale závislé více. A proto Čína v současných obchodních tenzích vyhrává.

Investoři mění způsob hodnocení výsledků firem: Alphabet ukazuje, že umělá inteligence pomáhá jeho výsledkům, ale zároveň zvýšil své investiční výdaje. Na CNBC to připomněl Lo Toney z Plexo Capital, podle kterého zveřejněné výsledky této společnosti a reakce akcií na ně ukazují, že se změnilo to, jak investoři hodnotí čtvrtletní čísla. „Růst tržeb je nutný, ale ne dostačující.“ Stále více se hledí i na to, kolik kapitálu je nutno pro růst tržeb investovat a jak rychle se to na tržbách a ziscích projeví. A pozornost je věnována stále více i kapitálové struktuře společností, tedy tomu, jaký je poměr dluhů k vlastnímu jmění. To vše neplatí jen o institucionálních investorech, ale i o těch retailových.

Investiční boom umělé inteligence a „vy si bojujte, my vyhrajeme.“ Dva technologičtí analytici Dan Ives a Gil Luria přijali pozvání na rozhovor ke Stevu Eismanovi a debata se samozřejmě týkala zejména nových technologií a umělé inteligence. Luria poukázal na to, že nyní se hovoří především o tom, jaké návratnosti bude u investic do AI skutečně dosahováno. Týká se to i konkrétních firem a jako příklad můžeme uvést Microsoft. U něj totiž lze argumentovat, že jeho investice do AI se nezaplatí, a navíc na něj dolehne to, že AI bude nahrazovat tradiční software. Podle analytika se ale u této firmy dá stejně tak tvrdit, že investice se zaplatí a softwarové produkty Microsoftu budou i dál široce používány. Ives zopakoval, že podle něj probíhá další průmyslová revoluce, nicméně na trhu se budou opakovat období, kdy budou vládnout pochyby.

Eisman připomněl, že vysoké investice do AI nyní znamenají, že řada společností se stává náročných na kapitál. Musí vydávat nové akcie a dluhopisy, přestože tak po dlouhou řadu let nečinily a vše financovaly z toho, co vydělaly. K tomu nemusí být v oblasti modelů umělé inteligence žádná konkurenční výhoda a vývoj může směřovat ke komoditizaci a nízkým cenám za využívání AI. Ives k tomu řekl, že i podle něj bude ke komoditizaci samotných modelů docházet, hodnota bude v datech, která mají společnosti k dispozici. Společnosti budou „budovat své AI ekosystémy“, které konkurenční výhody mít budou.

Ives zopakoval svou tezi, podle které bude „AI párty“ trvat ještě řadu let. Firmy, které do této technologie neinvestují, pak podstupují riziko, že „na tuto párty přijdou pozdě“. Tím se diskuse přesunula k Applu, který se na rozdíl od řady jiných technologických společností drží v pozadí. Ives k tomu uvedl, že řada lidí po celém světě bude AI používat přes mobilní telefony. Luria dodal, že Apple stojí stranou a nechává ostatní, ať vymyslí a vyřeší všechny problémy.

„Pak bude používat ten nejlepší model, ten se ale v jeho zařízeních bude jmenovat Nová Siri. Vy bojujte, my hrajeme.“ Luria pokračoval s tím, že mezi softwarovými společnostmi jsou ve vztahu k AI „ty dobré, mezi ně patří třeba Microsoft a Palanit. A pak ty horší, třeba Salesforce.“ Ives dodal, že Apple má výbornou pozici pro monetizaci umělé inteligence na straně spotřebitelů.

Trumpovým cílem může být chaos, Čína obchodní potyčky vyhrává: Clům a obchodním tenzím nebyla nějaký čas věnována taková pozornost, ovšem ne kvůli tomu, že by jejich důležitost upadala. Nyní podle Bloombergu americká vláda v této oblasti přichází s řadou kroků a situaci komentoval Steven Rattner z Willett Advisors. Ten připomněl, že původní cla byla soudně zrušena, nyní se vláda snaží o jejich obnovu na základě konkrétních obchodních dohod. Tedy způsobem, který už není tak jednoduchý a přímočarý jako předtím.

Trump se „pokouší využít čehokoliv v obchodních dohodách, aby uvalil cla na kohokoliv, kdo se mu právě znelíbil nebo se postavil proti němu. Bude toho teď hodně, děje se to u léků, jeden den cla zavedou, pak je pozdrží,“ řekl Rattner s tím, že trhy by v takové situaci obvykle reagovaly citlivě, ale nyní se zaměřují na jiné věci. A co ukazují reálná data k tvrzení, že cla mají do USA přenášet výrobu ze zahraničí? Expert k tomu řekl, že tento přesun vrcholil na konci Bidenova funkčního období, od té doby navzdory některým tvrzením počet nově budovaných továren ve Spojených státech klesá.

Rattner dodal, že datová centra nejsou považována za továrny a do uvedených dat se tedy mohutné investice hyperscalerů nepromítají. Určitý posun k výrobě na domácí půdě sice probíhá, ale promítají se do něj i zkušenosti firem získané po roce 2020. Ty ukazují, že někdy je lepší mít výrobu doma než dovážet třeba z asijských zemí. „Trump tomuto posunu pravděpodobně trochu pomohl, ale fundamentálně je výroba na stejné trajektorii jako během posledních padesáti let. Tedy na klesajícím trendu.“

K rozpočtovým deficitům Rattner řekl, že cla na ně nemají v podstatě žádný dopad, nedochází k tomu, že by příjmy z nich deficity snižovaly. Podle experta si ani Trump nemyslel, že by k něčemu takovému mohlo dojít. „Tohle není rok 1800, kdy byla cla skutečně použita na vyrovnání rozpočtu a splacení vládních dluhů,“ dodal expert. Na Bloombergu se pak hovořilo o tom, že podle některých názorů Trump svým neustálým ohlašováním nových cel a následným pozdržováním jejich platnosti a změnami jejich výše chce vytvořit nejistotu, která sama o sobě bude motivovat americké společnosti, aby prostě vyráběly doma a nemusely se tímto tématem zabývat. Rattner  k tomu zmínil, že neví, zda tomu tak skutečně je, ale že Trump takhle přemýšlet může.

Vývoj také potvrzuje, že „je toho jen velmi málo, co Čína potřebuje kupovat od Spojených států a nemůže to sehnat jinde. A je toho hodně, včetně vzácných minerálů, co Spojené státy musí kupovat od Číny.“ Ta proto „vyhrává“, protože je toho jen velmi málo, co musí dovážet, avšak Spojené státy „si mohou vystačit bez hraček“, ale ne bez řady dalších položek, které z Číny dováží.