Microsoft's monster quarter pulls markets back from the Fed dip

US stocks clawed back Wednesday's sharp losses on Thursday, with @Microsoft leading a broad tech-driven rebound after delivering one of the most closely watched earnings reports of the season.

Azure crosses $100 billion for the first time

Microsoft reported fourth-quarter revenue of $90 billion, up 18% from a year earlier, and said Azure cloud revenue surpassed $100 billion for the first time in fiscal year 2026. Revenue from Azure and other cloud services rose 43%, highlighting continued demand for Microsoft's cloud infrastructure and AI offerings. Adjusted earnings per share for Q4 reached $4.74, exceeding expectations of $4.24, while revenue outperformed analyst estimates of $87.62 billion.

Microsoft said Azure revenue in the 2026 fiscal year exceeded $100 billion for the first time. At that size, the business trails Amazon Web Services while remaining larger than Alphabet's Google Cloud. The company also said Microsoft 365 Copilot now has more than 30 million paid seats. Shares of @Microsoft surged roughly 16% in Thursday's session, making it the single biggest lift to the S&P 500 and the Nasdaq.

A narrow rebound against a difficult backdrop

The S&P 500 rallied, recovering two-thirds of its drop from the prior day, which was its worst in seven weeks. The Nasdaq composite jumped 2.3% a day after it fell 9.8% below its record set last month. The rebound, however, is not uniform.

@Meta fell around 9% after issuing a weak revenue forecast that rattled investors. The Federal Reserve left interest rates unchanged on Wednesday, but the decision failed to reassure markets. Treasury yields surged, with the 30-year yield climbing above 5.2%, its highest level since 2007, as investors questioned whether policymakers were moving aggressively enough to contain inflation. Yields had jumped after Fed chairman Kevin Warsh gave few clues about the central bank's next steps on rates.

Markets are pricing roughly even odds of a September rate hike, keeping sentiment fragile. Amazon and Apple were set to report after the closing bell, alongside Coinbase, following mixed results from Microsoft and Meta. Their results will help determine whether the day's rebound has any lasting momentum or remains a single-stock story.

Sources:
CNBC: Microsoft beats Q4 cloud expectations as full-year Azure revenue tops $100 billion
Quartz: Microsoft Q4 2026 earnings: Azure tops $100 billion
BNN Bloomberg: Microsoft leads a rally on Wall Street, while worries about inflation remain in the bond market