When Microsoft (NASDAQ:MSFT) reports again later this month, one line will draw more attention than the rest: how fast Azure grew. That’s a lot of weight for a single business inside a company that also sells Windows, Office, Xbox, and LinkedIn. But Azure has earned the spotlight.
Azure is Microsoft’s cloud platform. Businesses rent its computing power, storage, and AI tools to run their own apps and models. They pay as they use it, so every new AI workload becomes recurring revenue. In fiscal 2026, Azure’s revenue passed $100 billion for the first time, according to CEO Satya Nadella, a milestone that cements Microsoft’s standing among the 10 Best Growth Stocks to Buy Now According to Billionaires. The catch is what it costs to keep that engine growing. Whether the stock looks fairly priced comes down to one thing: can Azure’s growth keep outrunning the bill?
Customers Have Already Signed Up
Azure revenue jumped 43% in fiscal Q4 2026, the most recent quarter on the books. That helped lift the Intelligent Cloud segment to $39.3 billion, up 32%.
Speed is only half the story, though. The stronger evidence of a moat sits in commercial remaining performance obligation (contracted revenue not yet recognized), which climbed 84% to $678 billion. Enterprise customers don’t sign commitments that size with a provider they plan to leave, a massive backlog that cements Microsoft’s top ranking on lists like the 10 Best Cloud Computing Stocks to Buy According to Billionaires.
Microsoft’s other advantage is distribution. Companies already living in Microsoft 365 are an easy sell for AI add-ons, and Microsoft 365 Copilot has topped 30 million paid seats, per Nadella. The broader Microsoft Cloud business brought in $59.3 billion in the quarter, up 27%.
Profits Kept Pace
Fast growth doesn’t mean much if margins buckle under it. In fiscal Q4, revenue and operating income both rose 18%, a sign the cloud boom isn’t being bought with thinner profits yet. Earnings need one clarification. GAAP diluted EPS came in at $4.81, but that figure was lifted by net gains tied to Microsoft’s OpenAI stake. Non-GAAP EPS of $4.74, up 23%, strips those out, so it’s the cleaner read on the operating business. For the full fiscal year, non-GAAP EPS reached $17.28, up 22%. Not everything is humming. More Personal Computing revenue slipped 4%, with Xbox content and services down 10%. That just underlines how much of the story now rests on the cloud.
Is Microsoft Spending Too Much to Stay Ahead?
This is the worry that won’t go away, and if you own the stock, it’s the one worth watching. Capital expenditures hit $35.8 billion in fiscal Q4, against $17.1 billion a year earlier. For the full year, spending reached $115.9 billion, up from $64.6 billion.
Those data centers and chips will show up as depreciation for years, whether or not demand holds. If Azure growth cools while the spending keeps climbing, margins are where the pain would show first, a key risk that investors must weigh across the Top 10 AI Stocks That Will Skyrocket.
The counterweight is that $678 billion order book. Microsoft isn’t building on hope alone; much of the demand it’s building for is already under contract. That doesn’t erase the risk, but it shrinks it.
Cheaper Than Its Own History
At a forward P/E of 27.39, as of October 12, investors are paying $27.39 for every $1 of expected earnings. That’s a premium to the sector’s 22.87, but it’s below Microsoft’s own 5-year average of 30.50.
Growth is what makes the premium defensible. Analysts expect EPS growth of 19.80% in 2028, which is solid for a company already this large. While value investors can find cheaper tech multiples, Microsoft’s deep enterprise integration and Copilot expansion firmly position it among the 11 Best Agentic AI Stocks to Buy Right Now. The discount to its own history suggests the market is already pricing in some of the capex risk. That’s a reasonable place for the stock to sit heading into the next report.
Big-money sentiment has cooled slightly, with 273 hedge funds holding the stock in the most recent quarter, down from 282 in the prior one. Short interest is just 0.82% of the float, pointing to relatively limited bearish positioning.
Azure Has to Keep Earning It
The evidence points to a cloud business with growing contracted demand and steady margins, priced below Microsoft’s own historical norm. For long-term investors comfortable with heavy spending in exchange for cloud and AI exposure, the setup looks reasonable. What would change that picture is a sharp slowdown from Azure’s 43% pace while capital spending keeps rising. If that happens, today’s multiple would start to look a lot less forgiving.
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