Shares of Microsoft Corp. (MSFT) jumped nearly 5% Thursday following a stellar earnings report, pushing its market capitalization past $4 trillion for the first time. Microsoft becomes only the second company to reach that milestone, following Nvidia Corp. (NVDA), which crossed the threshold three weeks earlier.
The software giant’s gains helped propel major ETFs to new heights. The Vanguard S&P 500 ETF (VOO), which holds a 7% allocation to Microsoft, and the Invesco QQQ Trust (QQQ), where Microsoft represents 9% of the portfolio, both traded at all-time highs.
In its fiscal fourth quarter, Microsoft reported earnings per share of $3.65, beating Wall Street estimates of $3.37. Revenue came in at $76.4 billion, topping expectations by 3.5% and marking an 18% increase from the prior year.
At the heart of the company’s growth story is artificial intelligence. Microsoft continues to embed AI into its own software products while offering cloud-based AI infrastructure to other companies through Azure, which has emerged as a key driver of growth. According to CEO Satya Nadella, Azure alone generated more than $75 billion in revenue over the past year, rising 34% from the year before.
“Cloud and AI is the driving force of business transformation across every industry and sector,” Nadella said. “We’re innovating across the tech stack to help customers adapt and grow in this new era.”
The broader “Azure and other cloud services” category grew by 39%, its fastest pace since 2022. Demand has been so strong that Microsoft has struggled to keep up. Despite ramping up capacity, Nadella acknowledged that supply remains constrained.
Even OpenAI—Microsoft’s high-profile AI partner, in which it holds a significant stake—has had to lean on other cloud providers like Oracle to meet its compute needs due to bottlenecks in Microsoft’s infrastructure.
To close the gap, Microsoft plans to spend a staggering $30 billion on capital expenditures this quarter alone. So far, investors appear supportive of the aggressive investment strategy, betting that AI demand will justify the outlay.
The developments also bode well for Nvidia, whose chips power much of the AI infrastructure underpinning Microsoft’s growth.
As the AI race intensifies, ETF investors continue to benefit, especially those in funds with heavy exposure to the megacaps leading the charge.
