Shares of Microsoft Corp. (MSFT) jumped almost 5% Thursday following a stellar earnings report, pushing its market capitalization previous $4 trillion for the primary time. Microsoft turns into solely the second firm to succeed in that milestone, following Nvidia Corp. (NVDA), which crossed the edge three weeks earlier.
The software program large’s beneficial properties helped propel main ETFs to new heights. The Vanguard S&P 500 ETF (VOO), which holds a 7% allocation to Microsoft, and the Invesco QQQ Belief (QQQ), the place Microsoft represents 9% of the portfolio, each traded at all-time highs.
In its fiscal fourth quarter, Microsoft reported earnings per share of $3.65, beating Wall Road estimates of $3.37. Income got here in at $76.4 billion, topping expectations by 3.5% and marking an 18% enhance from the prior yr.
On the coronary heart of the corporate’s development story is synthetic intelligence. Microsoft continues to embed AI into its personal software program merchandise whereas providing cloud-based AI infrastructure to different corporations by way of Azure, which has emerged as a key driver of development. In accordance with CEO Satya Nadella, Azure alone generated greater than $75 billion in income over the previous yr, rising 34% from the yr earlier than.
“Cloud and AI is the driving pressure of enterprise transformation throughout each trade and sector,” Nadella mentioned. “We’re innovating throughout the tech stack to assist clients adapt and develop on this new period.”
The broader “Azure and different cloud companies” class grew by 39%, its quickest tempo since 2022. Demand has been so sturdy that Microsoft has struggled to maintain up. Regardless of ramping up capability, Nadella acknowledged that offer stays constrained.
Even OpenAI—Microsoft’s high-profile AI associate, wherein it holds a big stake—has needed to lean on different cloud suppliers like Oracle to fulfill its compute wants because of bottlenecks in Microsoft’s infrastructure.
To shut the hole, Microsoft plans to spend a staggering $30 billion on capital expenditures this quarter alone. Up to now, buyers seem supportive of the aggressive funding technique, betting that AI demand will justify the outlay.
The developments additionally bode effectively for Nvidia, whose chips energy a lot of the AI infrastructure underpinning Microsoft’s development.
Because the AI race intensifies, ETF buyers proceed to profit, particularly these in funds with heavy publicity to the megacaps main the cost.
