What do Microsoft's strong earnings mean for these ASX shares?

Microsoft Corporation (NASDAQ: MSFT) has just delivered a fourth quarter earnings that will have direct implications for ASX investors.

The software giant reported revenue of US$90 billion for the June quarter, up 18% year over year.

Net income climbed 31% to US$35.8 billion.

Microsoft Cloud revenue reached US$59.3 billion, a 27% increase, while Azure growth accelerated to 43% from 40% in the prior quarter.

So what does any of this have to do with the Australian share market?

The answer runs through the physical infrastructure that every hyperscaler has to use.

What Microsoft actually reported

In the case of Microsoft, the headline number that matters most for ASX investors is not revenue at all. It is capital expenditure.

Microsoft spent US$41 billion on capex and finance leases in the June quarter alone, a jump of roughly 69% year over year.

The company expects to spend more than US$50 billion in the September quarter.

Chief financial officer Amy Hood told analysts:

"We expect FY27 capital expenditures will grow year-over-year given demand signals across our portfolio."

Commercial remaining performance obligations, effectively contracted revenue not yet recognised, jumped 84% to US$678 billion.

Azure passed US$100 billion in annual revenue for the first time, and Microsoft 365 Copilot surpassed 30 million paid seats.

What Microsoft's capex bill means for ASX shares

Hyperscaler capital expenditure has to land somewhere physical.

It funds buildings, power connections, cooling systems and fibre.

That is the demand curve two ASX 200 shares sit directly on, and both have re-rated hard on the thesis over the past year.

NextDC Ltd (ASX: NXT) is the local pure-play data centre operator.

The company is carrying roughly $5 billion of forecast FY27 capital expenditure to build out capacity for AI workloads.

A recent agreement with a frontier AI lab underlined its ability to win the largest contracts on offer.

Goodman Group (ASX: GMG) plays a different role in the same story.

Data centres now account for 73% of its development pipeline, which was on track to reach $18 billion by June 2026.

Its edge is a secured power bank of 6.4 gigawatts across 16 cities, assembled over years and difficult for a newcomer to replicate.

Securing grid connections has become the real bottleneck in this industry, and Goodman has positioned itself very nicely to benefit from this need.

Megaport Ltd (ASX: MP1) sits in the middle, providing the connectivity layer between enterprise customers and platforms like Azure.

Data#3 and the direct Microsoft earnings link

Data#3 Ltd (ASX: DTL) has the most literal exposure of the group.

The company resells Microsoft licences, Azure capacity and Microsoft 365 Copilot to Australian enterprise and government customers.

That is a double-edged relationship.

Data#3 grew first-half FY26 gross sales 9.2% to $1.5 billion, with net profit before tax up 4.5% to $33.5 million.

But margins in its Software Solutions division were squeezed by changes to Microsoft's partner incentive program.

Management does not expect those vendor changes to materially dent the group's FY26 numbers.

Rising Azure consumption is a tailwind for volumes, while vendor concentration remains the standing risk.

Data#3 reports its FY26 result in August, and investors will want to see whether the incentive headwind has washed through.

Foolish takeaway for Microsoft earnings

Microsoft's earnings were a reminder that AI infrastructure spending is still accelerating rather than plateauing.

For NextDC and Goodman Group, that spending is effectively the whole thesis.

For Data#3, the benefits are more nuanced, since the same vendor that drives its growth also sets its margins.

The obvious risk is that hyperscalers eventually decide the returns do not justify the capital outlay.

Alphabet Inc's (NASDAQ: GOOG) recent capex guidance was met with a sharp share price fall, which shows the market's patience is not infinite.

For now, though, the money is still being committed, and Australian infrastructure is on the receiving end.

The post What do Microsoft's strong earnings mean for these ASX shares? appeared first on The Motley Fool Australia.

Motley Fool contributor Mark Verhoeven has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Goodman Group, Megaport, and Microsoft. The Motley Fool Australia has recommended Alphabet, Data#3, Goodman Group, and Microsoft. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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