Microsoft shares jumped 18% in a week after fiscal fourth-quarter earnings showed Azure annual revenue topped $100 billion for the first time, erasing the year's losses and lifting the stock to a 25 times forward earnings multiple.
The quarter that changed the tape
Revenue grew 18% year over year to $90 billion, while net income climbed 31% from the same period a year earlier. Azure, the primary engine, expanded 43% and crossed the $100 billion annual revenue threshold for the first time. Microsoft 365 Copilot reached 30 million paid seats, a signal that enterprise stickiness is translating to the AI layer.
Valuation reset
Before the report the stock traded at roughly 19 times forward earnings, a modest multiple for a company of Microsoft's scale. The rally pushed that multiple to 25 times. Analysts project 15% to 16% annual earnings growth over the next three to five years, a pace that makes the current price look reasonable if the AI trajectory holds.
Silicon and supply
Nadella has leaned into in-house silicon and frontier models to lower the cost of delivering AI at scale, a response to customer concern over the expense of cutting-edge models. He noted that AI demand continues to outpace supply despite ongoing data-center investment.
The contrarian view
The Motley Fool's Stock Advisor service left Microsoft off its latest list of ten best stocks, a reminder that not every analyst sees the same upside. The stock's year-to-date swing, from grinding lower to an 18% weekly pop, also underscores how concentrated the market's conviction has become around a single cloud franchise.