Microsoft has reported a strong financial year, buoyed by heavy investments in cloud computing and AI infrastructure. The company also crossed a major milestone, with its Azure cloud business generating more than $100 billion in annual revenue for the first time. As Microsoft strengthens its AI ambitions, CEO Satya Nadella has revealed that the company is preparing to launch an AI "super app" to compete with rivals such as OpenAI and Anthropic.
Sharing highlights from the company's latest earnings report on X, Nadella described it as a "record fiscal year for Microsoft." He said the company's annual revenue exceeded $331 billion, while its overall cloud business generated $214 billion in revenue.
MICROSOFT PLANS AI SUPER APP
During the earnings call, Nadella said Microsoft's Copilot platform is evolving beyond a chatbot into a comprehensive AI super app.
"This quarter, we are bringing Copilot experiences together, including code, in one super app... This is a major step forward, and I look forward to sharing more soon," he said.
The upcoming platform is expected to integrate multiple AI services into a single interface, allowing users to access a range of AI-powered tools from one application. The move positions Microsoft in more direct competition with OpenAI and Anthropic, both of which have established a strong presence in enterprise AI.
According to earlier reports, the super app is likely to combine the Copilot chatbot, GitHub Copilot coding assistant, Copilot Cowork and the Autopilot system. The concept is similar to OpenAI's ChatGPT Work app, which integrates ChatGPT with its coding assistant, Codex.
Nadella also said Microsoft is becoming increasingly self-reliant in AI by developing its own models and chips.
"That's really the enterprise design architecture that we are going to evangelise. We ourselves are using it," he said.
Microsoft initially relied heavily on OpenAI's large language models to power products such as Copilot. The company remains one of OpenAI's largest investors and continues to hold an equity stake in the AI startup.
The company also reported growing adoption of Copilot, with paid Microsoft 365 Copilot subscriptions rising to more than 30 million, up from 20 million in the previous quarter.
MICROSOFT'S CASH POSITION REMAINS STRONG
Microsoft reported free cash flow of $19.6 billion during the quarter, comfortably exceeding analysts' expectations of $13.44 billion. However, the figure was down 23 per cent compared with the same period last year.
The results stand in contrast to several rivals that continue to spend aggressively on AI. Google recently reported negative free cash flow for the first time in more than two decades, while Meta's free cash flow dropped 91 per cent as both companies ramp up investments in AI infrastructure.
Microsoft also outlined its long-term investment strategy, announcing that it will now spread long-term data centre leases over 25 years instead of 15. The accounting change reduces reported annual capital expenditure without affecting the company's actual investment plans.
The company forecast reported capital expenditure of $50 billion for the first quarter of fiscal 2027 and $175 billion for calendar year 2026. Both projections were below market expectations, with the 2026 estimate also lower than Microsoft's earlier guidance of $190 billion.
Microsoft's cloud business continued to expand, with its backlog growing to $678 billion from $627 billion in the previous quarter. The company said the entire sequential increase of approximately $50 billion came from commitments made by customers outside the leading US AI model developers.
