Microsoft beats cloud revenue estimates as Azure grows 48% to $33.17 billion

Mixed · 2Microsoft reported on Wednesday 28 October that Azure revenue grew 48 per cent to $33.17 billion in the quarter ended September, above Visible Alpha's estimate of $32.84 billion. 1 2 Centre · 3Total revenue for the first quarter of fiscal 2027 was $92.3 billion, up 19 percent, a record for the tenth quarter in a row according to TechCrunch; net income was $33.6 billion, up 32 percent, according to The Verge, while Anadolu Agency and TechCrunch put net income at $36.6 billion (from $27.7 billion a year earlier), and the 32 percent rise matches that figure. 2 3 4 Centre · 1Shares were up about 6 per cent in extended trading; the stock had risen about 9 per cent so far this year through Wednesday's close. 1

Centre · 1CNA's updated story put the gain at about 4 per cent in extended trading, lower than the 6 per cent in its first version. 5 Centre · 1Microsoft Cloud revenue reached $63.9 billion, up 30 percent (31 percent in constant currency, per CFO Amy Hood), and commercial remaining performance obligations rose 73 percent to $677 billion. Microsoft said it returned $10.2 billion to shareholders in the quarter. 3 Centre · 1TechCrunch put the Azure beat at about $850 million against $32.3 billion expected (CNA cites Visible Alpha's $32.84 billion), and noted that 48% growth topped the 44% to 45% Hood had forecast in July. It said Azure was about 36% of revenue and slightly ahead of Google Cloud's $30.7 billion, though Google Cloud grew about twice as fast. 6

Centre · 1CNA, in a story datelined from the results, said the figures signal that Microsoft's heavy AI investment is paying off while Wall Street grows wary of Big Tech's debt-fuelled spending; Big Tech is expected to spend more than $700 billion this year on data centres, hardware and energy. 1 Centre · 1Financing worries have grown in recent weeks, with stress at neocloud CoreWeave and record-high costs to insure Meta's debt; investors sold off Meta and other AI-linked stocks last week after Meta raised its capital spending forecast and planned a stock sale. Microsoft had forecast capital expenditure of $190 billion in 2026 and faces pressure from agentic AI tools threatening its productivity software. 1 Centre · 1CNA reported free cash flow of $18.6 billion against the $8.54 billion analysts expected, and capital expenditure of $45.2 billion, below Microsoft's own $50 billion projection. 5

Centre · 1Some analysts, citing Truist, say Microsoft's strong balance sheet gives it an edge: its 5-year credit default swaps are the tightest among tech giants, and it is the only hyperscaler expected to stay cash flow positive next year. 1 Left · 1The quarter also brought a reporting overhaul: Microsoft now reports two segments, Agents and Infra, and Devices and Consumer, replacing the previous three. Agents and Infra, which includes Azure, Microsoft 365 and server products, brought in $76.8 billion (83 percent of revenue), up 25 percent. 2 Centre · 1Azure revenue will now be disclosed in dollars each quarter, a change CNA says began last month and gives a clearer comparison with Amazon Web Services and Google Cloud; Azure had $29.4 billion in the prior quarter. 1

Left · 1Devices and Consumer made $15.5 billion (17 percent), down three percent. Windows OEM and devices revenue fell 22 percent amid a PC market The Verge says dropped 20 percent, which it ties to a memory-cost crisis it calls "RAMageddon"; Microsoft blamed the comparison with Windows 10 end of support a year earlier, OEM inventory drawdowns and a weaker PC market. 2 Left · 1Xbox hardware revenue fell 14 percent and content and services, including Game Pass, fell 2 percent. Microsoft gave no Game Pass subscriber update, and more Xbox layoffs are rumoured; Xbox CEO Asha Sharma has said Xbox will return to player and revenue growth by the end of fiscal 2027. 2 Centre · 1In a regulatory filing, Microsoft disclosed $10 billion in revenue from commercial arrangements with OpenAI in the quarter, nearly 11% of revenue, compared with $24.1 billion for all of fiscal 2026; receivables from OpenAI were $7.2 billion, and Microsoft's stake fell from about 25% to 24%. TechCrunch said it is unclear how much came from revenue sharing versus Azure services. 7