Microsoft delivered record fiscal second-quarter results, reporting revenue of $72.3 billion, up 18% year over year, and earnings per share of $3.46, beating analyst expectations by a comfortable margin. The standout performer was the company Intelligent Cloud segment, where Azure revenue grew 37%, driven by an extraordinary surge in demand for AI computing services.
CEO Satya Nadella revealed that Azure AI services have reached an annual revenue run rate exceeding $20 billion, making it the fastest-growing product category in Microsoft history. The figure encompasses revenue from Azure OpenAI Service, which provides enterprise access to GPT and DALL-E models, as well as Azure Machine Learning, Cognitive Services, and the rapidly expanding Microsoft 365 Copilot subscriptions.
Microsoft 365 Copilot has been a particular bright spot. The AI assistant, which is embedded across Word, Excel, PowerPoint, Outlook, and Teams, now has over 25 million paid subscribers at $30 per user per month. Enterprise adoption has accelerated as companies move beyond pilot programs to full deployments, with average enterprise deals growing from 5,000 seats to over 20,000 seats in the past quarter.
The strong results come despite massive capital expenditure. Microsoft spent $15.8 billion on infrastructure during the quarter, primarily on data centers and AI chips, bringing total annual capex to over $55 billion. Nadella defended the spending, arguing that the company is in a once-in-a-generation platform shift comparable to the transition to cloud computing, and that the return on AI infrastructure investment is already exceeding internal projections.
Wall Street responded enthusiastically, pushing Microsoft shares up 6% in after-hours trading to new all-time highs. The company market capitalization briefly exceeded $3.8 trillion, reinforcing its position as the world most valuable public company. Analysts at Morgan Stanley raised their price target, citing the durability of AI demand and Microsoft dominant competitive position in enterprise AI services.
