Microsoft achieved a historic milestone by becoming the second company to reach a $4 trillion market capitalization after delivering blockbuster quarterly results that sent shares soaring 4.5% in early trading.
Microsoft’s stock jumped so much it briefly hit a massive $4.01 trillion valuation, making it the second company ever, after Nvidia to cross that mark. With shares up 28% this year, it’s clear investors are feeling confident about Microsoft’s big bets on artificial intelligence.
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Record Revenue Fueled by Cloud and AI Dominance
Microsoft reported stellar fourth-quarter results with revenue hitting $64.7 billion, up 15% year-over-year and exceeding Wall Street expectations. The company’s annual revenue reached $245.1 billion, driven primarily by its booming cloud business and AI services adoption.
Microsoft Cloud revenue surpassed $135 billion for the year, growing 23% annually. In the fourth quarter alone, cloud revenue reached $36.8 billion, up 21% from the previous year. The Intelligent Cloud segment, which includes Azure services, generated $28.5 billion in quarterly revenue with 19% growth.
Azure and other cloud services saw remarkable 29% revenue growth, with AI services contributing 8 percentage points to this expansion. The company now serves over 60,000 Azure AI customers, representing nearly 60% growth year-over-year, while average spending per customer continues rising.
AI Strategy Drives Customer Adoption Surge
Microsoft’s aggressive AI investments are paying dividends across its product portfolio. The company’s Copilot AI assistant has become a significant growth driver, with the number of daily workplace users nearly doubling quarterly.
Copilot for Microsoft 365 customers increased more than 60% quarter-over-quarter, while over 60% of Fortune 500 companies have adopted various Copilot services. GitHub Copilot now generates $2 billion in annual revenue, accounting for over 40% of GitHub’s revenue growth this year.
The AI boom extends beyond software services. Microsoft forecasted a record $30 billion in capital spending for the current fiscal quarter, with nearly all investments targeting cloud and AI infrastructure to meet surging demand.
Enterprise Business Shows Strong Momentum
The Productivity and Business Processes segment generated $20.3 billion in quarterly revenue, up 11%. Office 365 commercial revenue grew 13%, driven by higher adoption of premium E5 subscriptions and Copilot integration.
LinkedIn revenue increased 10% year-over-year, while Dynamics revenue grew 16%, led by Dynamics 365’s 19% expansion. Teams Premium subscribers surged 400% year-over-year to surpass 3 million seats, demonstrating strong enterprise demand for enhanced collaboration tools.
Commercial bookings exceeded expectations with 17% growth, while remaining performance obligations increased 20% to $269 billion, indicating robust future revenue visibility.
Gaming Business Gets Activision Boost
Gaming revenue jumped 44%, with 48 percentage points attributed to the Activision acquisition. Xbox content and services revenue soared 61%, helping drive the Xbox user base beyond 500 million monthly active users.
Windows commercial revenue also contributed to growth, supported by the launch of Copilot+ PCs and continued strength in business deployments.
OpenAI Partnership Accelerates AI Leadership
Microsoft’s multibillion-dollar investment in OpenAI continues generating returns. The exclusive access to OpenAI’s models has positioned Microsoft at the forefront of generative AI, powering enhancements across Azure, Office Suite, and other core products.
The partnership has enabled Microsoft to outpace competitors like Google Cloud and Amazon Web Services in AI-powered cloud services, with demand consistently exceeding available capacity in several AI service categories.
Financial Strength Supports Massive Investments
Strong financial performance enables Microsoft’s continued AI expansion. The company generated $88.1 billion in net income for fiscal 2024, supporting $34 billion in annual shareholder returns while funding aggressive infrastructure investments.
Operating income reached $109.4 billion annually, up 24% year-over-year, demonstrating the profitability of Microsoft’s cloud-first, AI-enhanced business model. Gross profit margins remain healthy across segments, particularly in high-margin cloud services.
Market Position Strengthens Despite Competition
Microsoft’s $4 trillion valuation comes as the broader tech sector experiences renewed investor enthusiasm. The milestone follows Nvidia’s achievement of the same valuation earlier this month, highlighting the market’s confidence in AI-driven growth stories.
The company has rebounded nearly 50% from April 2025 lows, when global markets faced uncertainty around trade policies. Strong earnings have demonstrated resilience against potential headwinds while validating Microsoft’s strategic AI investments.
Microsoft now trades significantly above Apple’s $3.12 trillion valuation, reflecting Wall Street’s belief in the company’s positioning for the next phase of technology evolution. The rapid ascent from $3 trillion to $4 trillion in just 18 months demonstrates the accelerating value creation from AI integration across Microsoft’s product ecosystem.
