It’s the end of an era at Microsoft: Frank X. Shaw, the executive who oversaw the tech giant’s communications for nearly three decades, first at an external agency and for the last 17 years as one of its senior leaders, is leaving at the end of the year.

Shaw, 64, said he’s not retiring, although he doesn’t have another job lined up. He plans to stop working for a while, do some of the things he hasn’t had time for, and then decide what’s next.

“I have had a ringside seat at some of the biggest leadership, technology, and business transformations that have ever taken place,” Shaw said, sharing the news of his departure (under embargo) in a phone call Thursday afternoon. “I just feel incredibly fortunate.”

He said he had been discussing his potential departure for some time with Takeshi Numoto, Microsoft’s chief marketing officer, looking for the right moment.

Microsoft has not announced a successor for his role as chief communications officer. In a LinkedIn post, Shaw said the company will consider internal and external candidates.

A statement from Shaw’s colleagues in corporate communications credited him for his many years shaping Microsoft’s “voice and reputation with intelligence, candor and wit. His leadership and contributions to the company are too extensive to list, as is the number of journalists who have, at one point or another, used his name in vain.”

A former Marine Corps public affairs officer, Shaw has worked with all three of Microsoft’s CEOs. He started on the agency side, at Waggener Edstrom — now known as We. Communications — when Bill Gates was still running the company.

He built his reputation defending and advocating for Microsoft through some of its hardest stretches: the antitrust years, the Windows Vista backlash, the scramble to replace Steve Ballmer as CEO, and the weekend in 2023 when OpenAI’s board fired Sam Altman.

As the company’s top communications executive, he has also told the story of Microsoft’s reinvention under CEO Satya Nadella, from the LinkedIn and Activision Blizzard deals to an AI push that has carried Azure past $100 billion in annual revenue.

Evolving with technology: Shaw has spent much of his career closely watching the tech landscape and moving Microsoft’s voice into new channels as they emerged.

“We’re always thinking about what is the art and science of communications,” Shaw told PRWeek. “How do we reach our audiences most effectively in a changing environment?” He called the arc from print to radio and TV to social media and newsletters a “constant evolution of influence.”

He turned the corporate blog into a place where the company argued its own case, writing “Microsoft by the numbers” himself in 2010 — a stat-by-stat comparison against Apple and Google that TechCrunch dubbed “fantastic passive-aggressive.”

He and his team experimented with different and risky methods of telling the company’s story, holding mass briefings under embargo and publishing documents known as the “Book of News” in advance of its major keynotes and conferences. The prospect of a reporter having to answer to “fxs” was no doubt a factor in ensuring the news (mostly) didn’t leak.

Shaw hired Steve Clayton out of a technical role at Microsoft in London, where he had been blogging about the company unofficially out of frustration with how it was perceived, and made him chief storyteller. In the middle of the AI boom, Clayton and Shaw embraced the analog undercurrents in popular culture and launched Signal, a quarterly Microsoft print magazine for business leaders.

Clayton was VP of communications strategy by the time he left in January to become chief communications officer at Cisco, making Shaw’s planned departure the second high-profile exit from Microsoft’s comms team in a year.

Adapting to AI: In recent years, Shaw made his own team a testing ground for AI, publishing what worked and what didn’t. In a 2023 post he described using Copilot in Teams to pull story ideas out of conversations with spokespeople and anticipate coverage after interviews, and asking the AI to “poke holes in a statement we’re making on a tricky topic.”

He called it his corporal, a reference to Napoleon, who was said to bring one to meetings and ask whether his generals’ war plans made sense to him. A survey of 80 people in Microsoft’s communications and marketing organization found 84% did not want to go back to working without it.

Shaw was also known to use AI as a sounding board when a story frustrated him, offering him an objective take before he called and let a particular reporter have it.

He announced his departure Friday morning in a message to Microsoft’s communications team (reminding them he’s still there for a few months yet) and his public post on LinkedIn.

“Thank you as well to all the reporters, editors, writers, influencers and analysts who have put up with me over this time, enduring my early and late night calls, my off the record ‘no comments,’ my bad story ideas and my extended commentary on headlines and positioning,” he wrote.

“You all have incredibly hard and valuable jobs,” he added, “and while I’ve not agreed with everything said about us 😊 I appreciate you anyway.”

Microsoft and Amazon both saw their stocks surge again Monday, riding a post-earnings tech wave across the stock market that pushed Amazon past $3 trillion in value for the first time.

The gains follow earnings reports last week in which both companies’ cloud platforms exceeded expectations. Microsoft said Azure grew 43%, passing $100 billion in annual revenue for the first time. Amazon said AWS grew 37%, its fastest pace in 18 quarters.

Microsoft and Amazon are now the world’s fourth and fifth most valuable companies, respectively. The three ahead of them (Nvidia, Alphabet and Apple) are all headquartered in the Bay Area, although each has sizeable engineering centers in the Seattle region.

Amazon rose 4.6% in intraday trading to $284.15 as of publication time, after touching an all-time high of $287.20 earlier in the session, giving it a market value of $3.06 trillion.

Microsoft climbed 5.2% to $488.97, worth $3.63 trillion. Its rally began Thursday, when it added nearly $450 billion in market value, the largest one-day gain by any company on record.

The rallies came despite AI spending plans that have unsettled investors for much of the year. Microsoft went into earnings near a one-year low, after a $357 billion wipeout to start the year.

It’s all still coming at a huge cost. Microsoft spent a record $41 billion on capital projects last quarter and told investors to expect more than $50 billion in the current quarter. Amazon raised its 2026 forecast to about $220 billion from $200 billion, citing rising memory chip prices.

In one sign of the impact of the spending, Microsoft’s free cash flow fell 23% last quarter. Amazon’s free cash flow turned negative for the first time since 2023.

But cloud growth and other signs of demand for AI seem to have appeased investors for now.

Amazon CEO Andy Jassy told investors the spending reflects unmet demand: “Even at that amount, we will still not have enough capacity to meet all the demand we have in 2026, and I believe this dynamic will also be true in 2027 too. In fact, the demand we already have for 2028 is striking.”

The gains come as both companies operate with fewer people. Amazon confirmed 16,000 more corporate job cuts in January, bringing the total to 30,000 since October, along with more recent reductions in its robotics and artificial general intelligence groups.

Microsoft cut 4,800 jobs in July, revamping its salesforce and overhauling Xbox.

This week on the GeekWire podcast: Microsoft and Amazon both reported quarterly numbers, and both stocks rose on cloud results that beat expectations. Is all that AI spending paying off? And in related news, Microsoft sees a rare annual headcount decline, hitting product R&D hardest. 

Plus: Satya Nadella builds a Power BI dashboard out of an analyst’s research report, and touts it on the earnings call to make a bigger point. Jeff Bezos names Amazon’s chips business as the long-awaited fourth pillar. And AI House managing director Jacob Colker delivers a much-needed pep talk for Seattle tech, calling on the region to recognize and build on its strengths. 

Related stories and links

Microsoft and Amazon earnings

• Microsoft Azure tops $100B in annual revenue as record AI spending cuts into cash flow
• AWS is ‘booming,’ but Amazon’s free cash flow turns negative on record AI spending
• Microsoft R&D jobs drop for second straight year as total headcount falls for first time in a decade
• Which Microsoft businesses are growing and shrinking, according to obscure table in regulatory filing

Amazon’s fourth pillar

• Jeff Bezos says this business is becoming Amazon’s next ‘pillar’

A rallying cry for Seattle tech

• Watch: A venture capitalist’s passionate speech, a rallying cry, really, about Seattle
• Seattle’s AI2 Incubator rebrands as AI House, and adds key investor as managing director
• ‘I’m tired of that narrative’: Seattle VC pushes back on tech exodus talk

The Washington tech ecosystem

• New map traces Washington state’s tech ‘universe’ to a few key hubs, and shows what’s at risk
• After hiring AWS exec and raising $107M seed round, Virginia startup plants flag in Seattle area
• GeekWire’s Seattle engineering centers list

Subscribe to GeekWire in Apple Podcasts, Spotify, or wherever you listen.

Microsoft’s Azure cloud business grew 43% last quarter, blowing past the company’s own forecast and surpassing $100 billion in annual revenue for the first time, providing fresh evidence of the potential for artificial intelligence to fuel new growth for the tech giant.

The company’s results for its fiscal fourth quarter also showed the price of that growth: capital spending hit a record $41 billion, largely to support the company’s AI buildout, and free cash flow sank 23% even as operating profits jumped 18%.

And in a new twist, Microsoft shares rose more than 5% in after-hours trading, in contrast with the recent pattern in which the company’s strong results were met with selloffs that pushed its stock near a one-year low.

Companywide results: Overall, Microsoft reported revenue of $90 billion for the quarter, up 18% from a year ago, and net income of $35.8 billion, up 31%. Analysts had expected $87.7 billion in revenue, a figure that was already at the top of Microsoft’s own guidance range.

Microsoft’s adjusted earnings of $4.74 per share topped the $4.24 that analysts expected, according to Yahoo Finance. That included a $3.2 billion gain on Microsoft’s investment in Anthropic, part of a 27-cent benefit from one-time items. Even excluding those items, the company said, it exceeded expectations across revenue, operating income and earnings per share.

Microsoft 365 Copilot surpassed 30 million paid seats, up from 20 million last quarter. That’s still less than 7% of the roughly 450 million commercial Microsoft 365 seats, a gap that has drawn investor skepticism all year.

Microsoft’s backlog grew 84% to $678 billion. Known as remaining performance obligation, or RPO, it’s the value of contracts that customers have signed but that Microsoft hasn’t delivered on yet, basically the business Microsoft has already locked in but has yet to record as revenue.

Investors have been worried for a year that too much of it came from a single customer, OpenAI. Microsoft said all of the $51 billion increase over the prior quarter came from customers other than the big AI model companies. Setting OpenAI aside, the backlog still grew 25%.

Windows OEM and Devices revenue declined 7%, hurt by slower PC demand and a tough comparison with last year’s Windows 10 upgrade wave. The decline would have been steeper, but PC makers built more machines to get ahead of rising memory prices, and Microsoft collects its Windows fee when a PC is built rather than when it’s sold.

Xbox content and services revenue fell 10% and Xbox hardware fell 13%. Microsoft also wrote down the value of unspecified Xbox assets. The company grouped that charge with severance costs and lower-than-expected costs from its retirement program — a net $500 million hit to operating income — and declined to say how much of it was Xbox or what was written down.

Microsoft has topped earnings expectations consistently in recent years, yet its stock is near a one-year low. So while it’s worth paying attention to revenue and profits when the company reports its fiscal year-end results Wednesday, there are clearly other forces at play on Wall Street.

Here are the key stats and trendlines to watch going into the earnings report for the fourth quarter of the company’s 2026 fiscal year, ended June 30.

Core numbers: Analysts expect revenue of about $87.7 billion for the quarter, up 14.7% from a year ago, and earnings of $4.24 per share, up 16%, according to Yahoo Finance. Microsoft’s own revenue guidance was $86.7 billion to $87.8 billion — meaning Wall Street is looking for a result at the very top of the company’s range.

For the full fiscal year, that works out to roughly $329 billion in revenue, up 17% from $281.7 billion in fiscal 2025.

Capital expense: This is the big one. Microsoft told investors to expect more than $40 billion in capital spending for the quarter, which would be a record — up from $31.9 billion in the March quarter and $37.5 billion in the one before that. About two-thirds goes to GPUs and other short-lived hardware.

For the calendar year, the company expects to spend roughly $190 billion. Chief Financial Officer Amy Hood said about $25 billion of that total is the result of higher component prices.

One big question this week will be the company’s guidance for capex going forward. Because this is the fiscal year-end, Wednesday brings the company’s first capital spending guidance for fiscal 2027, which began July 1.

Capex concerns: Google parent Alphabet last week foreshadowed what may happen to Microsoft. It reported revenue up 24% and cloud revenue up 82%, then raised its own capital spending forecast to as much as $205 billion — well above the roughly $188 billion analysts expected. The stock fell 7% the next day and Alphabet fell below its prior $4 trillion market valuation.

Big picture, investors seem to have decided the capital spending is getting ahead of the payoff. Data centers and chips cost money now, while the AI revenue meant to justify them arrives over years — if it ever reaches the scale these companies are promising.

Moody’s Ratings raised its own red flags about this last week, saying the six largest cloud and AI platforms will spend about $785 billion this year and close to $1 trillion in 2027. Demand is real and accelerating, the ratings agency said, but “the ultimate return on investment is unclear.”

Cloud margins: This is where the capital spending starts to become evident in the company’s core quarterly results. Microsoft Cloud gross margin — the share of cloud revenue left after the cost of delivering the service — has slipped from 72% three years ago to 66% last quarter.

For the quarter it reports Wednesday, Microsoft told investors to expect about 64%. On the prior earnings call, Hood attributed the decline to AI infrastructure costs and growing use of GitHub Copilot, partly offset by efficiency gains in Azure.

Microsoft doesn’t absorb the cost of a data center all at once. It spreads the expense across the years the equipment is expected to last. That cost shows up here, in the expense of running the cloud — making this one of the first places where the capital spending hits earnings.

Microsoft Azure: On its prior conference call, Microsoft said it expected the Azure cloud business to grow 39% to 40% in constant currency in Q4, a slight acceleration from the 39% posted in Q3. Analysts expect roughly the same, with some outliers such as BNP Paribas looking for 41%.

But the published expectations aren’t the real bar. In January, Azure grew 38% — ahead of Microsoft’s guidance — and the stock fell 10%, because Wall Street had privately been expecting 39.4%.

Azure’s growth rate also reflects a choice as much as it does demand. Microsoft has been routing scarce computing capacity to its own products first — Copilot, GitHub Copilot, internal research — and selling what remains to Azure customers. Hood has said the growth rate would have been higher had that capacity gone to customers instead. Demand continues to outrun supply, and the company expects to stay “constrained at least through 2026.”

Business Insider reported Sunday that the shortage of supply has pushed Microsoft to shop for additional computing capacity outside its own data centers, evaluating capacity from Amazon and Google, and that Amazon stepped in following a series of GitHub outages.

Copilot and AI revenue: Microsoft said in April that its AI business had reached a $37 billion annual revenue run rate, up 123% from a year earlier. It was the first update to that number since January 2025, when the company put it at $13 billion. Whether Microsoft discloses it a third time Wednesday is a signal in itself.

Microsoft 365 Copilot passed 20 million paid seats last quarter, up from 15 million in January. That’s about 4.4% of the 450 million commercial seats across Microsoft 365 — the gap that has drawn skepticism from investors all year. Microsoft said it expects the number of new paid seats to grow again this quarter.

Meanwhile, the company is launching new initiatives to drive adoption of AI among its customers. Earlier this month it launched the Microsoft Frontier Company, a $2.5 billion effort to put 6,000 engineers inside customer organizations to help them deploy AI.

Wednesday is also the first report since Microsoft changed how it charges for GitHub Copilot. As of June 1, customers pay based on usage rather than a flat fee per user.

The OpenAI backlog: Microsoft’s remaining performance obligations — RPO, a measure of contracts customers have signed but the company has not yet fulfilled — reached $627 billion last quarter, up 99% from a year earlier. About a quarter of that is expected to become revenue in the next 12 months. It’s the strongest evidence that there’s real demand supporting the AI buildout.

But the RPO is also highly concentrated. In January, when it stood at $625 billion, 45% was tied to OpenAI — roughly $281 billion committed by a single customer that is still losing money. Take OpenAI out of last quarter’s figure and the growth drops from 99% to 26%.

Then in April, Microsoft and OpenAI revamped their partnership, and OpenAI ended its exclusive commitment to run on Azure.

Reliability: On July 23, a bug in Microsoft’s automated network maintenance tooling cut a West US Azure data center off from the company’s global network, knocking out Teams, SharePoint, OneDrive and Copilot Chat for about five hours. Microsoft has published a preliminary post-incident report, and a final one is due within two weeks.

The outage falls in the quarter that began July 1, so it won’t appear in Wednesday’s numbers. But it comes as Microsoft is asking businesses to hand AI agents real control of their operations.

Retirement charge: Wednesday’s results will include about $900 million in one-time costs from Microsoft’s voluntary retirement program, the first in the company’s 51-year history. Hood said roughly $350 million falls in the cost of revenue and $550 million in operating expenses.

About 8,750 U.S. employees were eligible — 7% of Microsoft’s U.S. workforce — and about 30% accepted, Chief People Officer Amy Coleman confirmed in an interview with GeekWire, in line with what the company expected. Those departures reduced the size of the 4,800-job cut Microsoft announced July 6, which happened after this quarter ended.

Even with the retirement costs, Microsoft told investors it expects operating margins for the full fiscal year to be about a point higher than last year. Hood also said on last quarter’s call that headcount declined year over year and will keep declining in fiscal 2027.

Windows: Microsoft expects Windows OEM revenue — what PC makers pay to put Windows on their machines — to decline close to 20% this quarter.

A few factors are driving this:

• Last year’s wave of PC upgrades, when support for Windows 10 ended, makes for a tough comparison.
• PC makers stocked up on parts and machines ahead of rising memory prices and are now working through them.
• The PC market itself is slower, because memory prices have made computers more expensive.

The memory shortage is hitting Microsoft a few different ways. In addition to adding about $25 billion to the company’s capital spending this calendar year, as noted above, it lowers what Microsoft earns from Windows. Also, in late June, Microsoft raised Xbox console prices by $100 to $150, saying storage and memory costs had risen more than 2.5 times.

This week: Facebook parent Meta reports the same afternoon as Microsoft, with Apple and Amazon on Thursday and Alphabet already out. Check back Wednesday afternoon for coverage.