Microsoft's profits increased by a third

Microsoft reported a 31 percent increase in net profit for its fiscal year ending in late 2026, according to results released yesterday. The company’s revenue rose 18 percent to $90 billion in the final quarter of the fiscal year, while net income surged to $35.8 billion. This marked a sharp contrast with its investment in OpenAI, which generated $480 million during the period compared to $1.6 billion in the same period last year. For the full fiscal year 2026, Microsoft recorded $134 billion in net income, up 31 percent from the previous year, with total revenue reaching $331 billion. The company adjusted its planned investments for the calendar year 2026 downward due to changes in valuation methods, reducing them from $190 billion to $175 billion. These figures remain heavily dependent on developments in the artificial intelligence sector, where investment reached $41 billion in the latest quarter, a 70 percent increase over the same period last year. This stands in stark contrast to competitors such as Google, which has forecasted higher capital expenditures. Despite the cautious approach to investments, investors were reassured by the strong financial performance, leading to a nearly nine percent rise in Microsoft’s stock price following the earnings announcement. However, the share price remains about one-fifth below its peak from last autumn. Two business units underperformed relative to past performance, Xbox and Windows OEM. Meanwhile, the intelligent cloud segment saw high growth, rising 32 percent, and Microsoft 365 subscription packages grew by 24 percent. These gains helped offset weaker performances elsewhere within the company. Investment levels in the AI sector have drawn attention, particularly after reports indicated that Microsoft allocated $40 billion per quarter for investments. Some users questioned whether there was available data on how much the European Union would invest in data centers, cloud infrastructure, and AI hardware this year and in the coming years. Others suggested consulting companies such as Schwarc Group and Scaleway for more specific information. Additionally, some users noted that Chinese firms are offering large language models for free, potentially undermining substantial AI-related investments being made elsewhere. Discussions around cash flow highlighted concerns about liquidity among major tech firms. Microsoft generated $182.9 billion in free cash flow for the last fiscal year, with $19.6 billion in free cash flow available. Its real operating margin stood at 10.72 percent. In comparison, Apple produced $111.48 billion in cash flow and had $98.77 billion in free cash flow, resulting in an operating margin of 88.60 percent. Alphabet generated $164.7 billion in cash flow, with $73.3 billion in free cash flow, yielding an operating margin of 44.51 percent. Oracle, however, faced challenges, generating $20.8 billion in cash flow but experiencing a negative free cash flow of $0.4 billion. Oracle began ambitious construction of AI data centers, yet it struggles with insufficient funds to complete these projects. Initially, it was anticipated that SoftBank would provide a financial injection, but discussions regarding this have since ceased. Some analysts pointed out that despite Microsoft's robust financial results, the broader picture includes a complex interplay of factors affecting cash flow dynamics across the industry. While Microsoft continues to show resilience, other players face varying degrees of difficulty in maintaining consistent cash generation amid evolving market conditions and strategic shifts. The situation underscores the need for continued monitoring of both macroeconomic trends and individual corporate strategies as they unfold.