# Microsoft (MSFT): Its Best Quarter Ever — But $140B of AI Capex Is Eating the Cash Flow

Page: https://stenobird.com/podcast/charged-alpha-stock-encyclopedia-7819792/microsoft-msft-its-best-quarter-ever-but-140b-of-ai-capex-is-eating-the-cash-flow
Text version: https://stenobird.com/podcast/charged-alpha-stock-encyclopedia-7819792/microsoft-msft-its-best-quarter-ever-but-140b-of-ai-capex-is-eating-the-cash-flow.md
Podcast: [Charged Alpha Stock Encyclopedia](https://stenobird.com/podcast/charged-alpha-stock-encyclopedia-7819792)
Published: 2026-07-30T04:22:07+00:00
Episode link: https://chargedalpha.podbean.com/e/microsoft-msft-its-best-quarter-ever-%e2%80%94-but-140b-of-ai-capex-is-eating-the-cash-flow/
Audio file: https://mcdn.podbean.com/mf/web/65cxvpy42zj2de6k/audio_z.mp3
Processing state: not_requested
JSON: https://stenobird.com/v1/public/podcasts/charged-alpha-stock-encyclopedia-7819792/episodes/microsoft-msft-its-best-quarter-ever-but-140b-of-ai-capex-is-eating-the-cash-flow
Duration seconds: 966

## Resource

Microsoft Corporation (MSFT) Q4 FY2026 — Microsoft (MSFT) reported fiscal Q4 2026 (quarter ended June 30, 2026) after the close on July 29, 2026, alongside its FY26 10-K. Revenue was $90.007B, +18% YoY (+17% constant currency) versus roughly $87.6B expected; GAAP diluted EPS $4.81 (+32%) and adjusted EPS $4.74 versus about $4.24 expected; operating income $40.6B (+18%) at a 45.1% margin. Azure and other cloud services grew 43% (43% cc), accelerating from 39/40/39/40 in the four prior quarters, and Azure crossed $100B of annual revenue for the first time. Microsoft Cloud revenue was $59.3B (+27%) but its gross margin fell to 65% — a fourth consecutive quarterly decline from 68%, which management attributes to sales mix shift to Azure and continued AI infrastructure investment. Commercial remaining performance obligation reached $678B (+84%; +25% excluding OpenAI) with a 2.3-year weighted-average duration. Microsoft 365 Copilot passed 30 million paid seats (from 15M two quarters ago) while M365 commercial seat growth stayed at +6% for a sixth straight quarter — so Copilot is ARPU, not seats. For the full fiscal year: revenue $331.8B (+18%), operating income $155.2B (+21%) at a 46.8% margin (+120bps), GAAP EPS $17.95 (+32%). The problem is cash: FY26 cash additions to property and equipment were $115.9B plus $24.6B of finance-lease additions (~$140.6B, 42.4% of revenue versus 22.9% in FY24), so free cash flow fell for a third straight year to about $67.0B (from $71.6B and $74.1B) and Q4 free cash flow dropped 23% to $19.6B. Leases signed but not yet commenced jumped from $92.7B to $329.1B. Depreciation is up 126% in two years to $34.3B. Microsoft funded all of it with zero new debt, drawing cash down 18.7% to $76.8B, lifting finance-lease liabilities 44% to $66.6B and str…

## Actions

- request_transcript: `POST https://stenobird.com/v1/public/podcasts/charged-alpha-stock-encyclopedia-7819792/episodes/microsoft-msft-its-best-quarter-ever-but-140b-of-ai-capex-is-eating-the-cash-flow/transcription-requests` — Idempotently request low-priority transcript generation for this episode.
- read_markdown: `GET https://stenobird.com/podcast/charged-alpha-stock-encyclopedia-7819792/microsoft-msft-its-best-quarter-ever-but-140b-of-ai-capex-is-eating-the-cash-flow.md` — Read the agent-friendly Markdown representation of this episode resource.

A page view does not enqueue transcription. Agents should invoke `request_transcript` explicitly when they need this episode processed.

## Transcript

Full transcripts are not published on public pages unless there is a clear rights basis.