Microsoft (NASDAQ: MSFT) closed its fiscal year with a quarter that left little doubt about the trajectory of its cloud and AI businesses. Revenue hit $90.0 billion, up 18% year-over-year and $2.4 billion above consensus estimates. Non-GAAP diluted EPS of $4.74 beat by $0.50, rising 23% from $3.86 a year ago. The beat was broad-based, but the engine was unmistakably Azure and the broader Microsoft Cloud segment.
Microsoft Cloud revenue reached $59.3 billion, up 27% year-over-year. Azure and other cloud services grew 43%, accelerating from the prior quarter's pace and reflecting sustained enterprise demand for both migration and AI workloads. The forward-looking signal is even stronger: commercial remaining performance obligation (RPO) surged 84% to $678 billion. That is not a rounding error. An RPO of this magnitude, growing nearly as fast as the cloud business itself, suggests that the multi-year contracts underpinning Azure and Microsoft 365 are expanding in both size and duration. Customers are committing to larger, longer deals, which provides revenue visibility that most enterprise software companies can only dream of.
The Intelligent Cloud segment alone generated $39.3 billion in revenue, up 32% year-over-year, with operating income of $16.0 billion, a 31% increase. Segment margins held steady at roughly 41%, indicating that the heavy capital expenditure required to build out AI infrastructure is not yet compressing profitability at the segment level. That is a delicate balance, and one worth watching as capex continues to climb. The company spent $35.8 billion on property and equipment in the quarter alone, more than double the $17.1 billion a year ago. Full-year capex hit $115.9 billion, up from $64.6 billion. Those numbers are staggering, and they reflect the scale of the bet Microsoft is making on AI infrastructure. For now, the revenue growth is keeping pace, but the gap between capex and cloud revenue growth will be a key metric to track in coming quarters.
Productivity and Business Processes delivered $37.8 billion in revenue, up 14%. Microsoft 365 Commercial cloud revenue grew 16% when adjusted for a prior-year comparable that benefited from two points of in-period revenue recognition. Microsoft 365 Copilot, the AI-powered assistant, surpassed 30 million paid seats. That figure, disclosed for the first time, gives investors a tangible metric for AI adoption within the installed base. Dynamics 365 grew 13%, and LinkedIn revenue rose 12%. These are solid, steady growth rates, but they are not the story this quarter. The story is the cloud and AI flywheel.
More Personal Computing was the lone weak spot, with revenue of $12.9 billion, down 4%. Windows OEM and Devices revenue fell 7%, and Xbox content and services revenue dropped 10%. Search advertising revenue excluding traffic acquisition costs rose 10%, a bright spot in an otherwise declining segment. The PC market remains soft, and gaming is cycling tough comps. This segment is becoming a smaller part of the overall mix, which is the trend investors should focus on rather than the absolute decline.
The company returned $10.2 billion to shareholders through dividends and share repurchases in the quarter. That is a meaningful number, but it is dwarfed by the $35.8 billion in capex. The capital allocation story here is not about shareholder returns; it is about reinvestment. Microsoft is spending aggressively to build out AI capacity, and the returns are showing up in revenue growth and RPO. The risk is that the capex cycle overshoots demand, but the RPO data suggests that demand is real and contracted.
A few items in the quarter deserve scrutiny. The GAAP results included a $3.2 billion gain from the investment in Anthropic, which boosted GAAP EPS to $4.81. Excluding that and other discrete items, non-GAAP EPS of $4.74 still cleared estimates by a wide margin. The OpenAI investment continues to create noise in the income statement, but the non-GAAP adjustments are clearly laid out. The real story is not the accounting noise; it is the operating momentum. Azure revenue surpassed $100 billion on an annualized basis for the first time. That is a milestone that underscores the scale of the business.
Looking ahead, the absence of formal guidance in the release is notable. The company will provide forward-looking commentary on the earnings call, but the RPO figure of $678 billion is effectively guidance in itself. When contracted future revenue grows 84% year-over-year, the near-term outlook is already baked in. The question for the next fiscal year is whether the capex-to-revenue ratio improves as the infrastructure investments mature. If Azure growth sustains in the high 30s to low 40s, the current spending levels will look prescient. If growth decelerates, the margin pressure will become a topic. For now, the data supports the bull case.