Microsoft Revenue Rises 19% to $92.3 Billion as Azure Grows 48% and It Guides to Over $50 Billion in Q2 Capex

Microsoft reported fiscal first-quarter results after the market close on Wednesday, October 28, 2026, that topped Wall Street forecasts, as revenue from its Azure cloud platform grew 48% and spending on artificial intelligence data centers came in below analysts' projections. Revenue rose 19% to $92.3 billion in the quarter ended September 30, according to the company's earnings release filed with the Securities and Exchange Commission.

Against LSEG estimates, revenue of $92.28 billion beat the $90.69 billion consensus, and adjusted earnings of $4.89 a share topped the $4.73 expected, CNBC reported. The shares rose about 4% in extended trading, according to CNBC, and were nearly 4% higher in premarket trading on Thursday, CNBC reported.

Quarter in numbers

Operating income rose 21% to $45.9 billion, or 22% in constant currency. GAAP net income rose 32% to $36.6 billion, or $4.92 per diluted share, from $27.75 billion, or $3.72 per share, a year earlier. Excluding the impact of its investments in OpenAI, net income rose 18% to $36.4 billion and earnings per share rose 18% to $4.89. The OpenAI investment added $207 million, or $0.03 per share, to net income in the latest quarter, after reducing it by $3.1 billion, or $0.41 per share, a year earlier, the release said.

Microsoft Cloud revenue rose 30% to $63.9 billion, or 31% in constant currency. "We delivered a strong start to the fiscal year with Microsoft Cloud revenue of $63.9 billion, with growth accelerating to 30%," Chief Financial Officer Amy Hood said in the release. Commercial remaining performance obligation, a measure of contracted future revenue, increased 73% to $677 billion.

For the first time, Microsoft disclosed Azure revenue in dollars, at $33.17 billion, compared with $32.32 billion expected by analysts polled by StreetAccount, CNBC reported. Azure growth was 42% in the June quarter.

New segment structure

The company reported under two segments for the first time, reflecting changes announced in September. Agents and Infra, which contains Azure, Microsoft 365 cloud products, server and productivity licensing and industry solutions, generated revenue of $76.8 billion, up 25%. Within it, Microsoft 365 commercial cloud revenue rose 17% on a reported basis and 18% on an adjusted basis, and Microsoft 365 consumer cloud revenue rose 17%.

Devices and Consumer revenue fell 3% to $15.5 billion. Search and advertising revenue excluding traffic acquisition costs rose 12%, Xbox content and services revenue fell 2%, and Windows OEM and devices revenue fell 22%. On the earnings call, Hood said Windows OEM revenue fell 27% because of the prior-year demand tied to the end of Windows 10 support, inventory drawdowns by OEM and channel partners, and weaker PC market demand, according to a transcript of the call.

Capital spending and cash flow

Capital expenditures including finance leases totaled $45.2 billion, up about 30% from a year earlier, CNBC reported, below the $50.67 billion analysts surveyed by StreetAccount had projected. "Some third-party capacity deliveries we expected in Q1 were delayed," Hood said. Roughly three-quarters of the spending was for short-lived assets, primarily CPUs and GPUs, and finance leases were $7.4 billion. Cash paid for property and equipment was $39.4 billion.

Cash flow from operations rose 29% to $58 billion, and free cash flow was $18.6 billion, Hood said. CNBC reported that free cash flow declined 27% from a year earlier but remained positive, in contrast with Alphabet, which reported negative free cash flow the same day. Microsoft returned $10.2 billion to shareholders through dividends and share repurchases in the quarter.

Hood said Microsoft expects to remain free cash flow positive in fiscal 2027 and will "access additional sources of funding when we believe it is attractive to do so."

Outlook

For the fiscal second quarter, Microsoft guided to revenue of $96 billion to $97.1 billion, according to CNBC, compared with the $95.60 billion LSEG consensus. Hood forecast Azure revenue growth of 49% to 50% in constant currency, above the 45.1% StreetAccount consensus cited by CNBC. "Customer demand continues to exceed available supply," she said on the call. Agents and Infra revenue is expected at $80.1 billion to $80.7 billion.

"In Q2, we expect CapEx spend will be over $50 billion. Therefore, for the calendar year, spend should be approximately $170 billion due to the 3P capacity delays noted earlier," Hood said. She added that capital spending is expected to accelerate in the second half of the fiscal year, primarily on CPUs and GPUs, including higher memory and storage costs, as well as the third-party capacity deliveries that shifted to that period.

Chief Executive Satya Nadella said the number of people using Microsoft 365 Copilot rose 50% from the prior quarter, CNBC reported; the company did not disclose paid seats. As of Wednesday's close, Microsoft shares were up about 10% for the year, compared with a 13% gain for the S&P 500, according to CNBC.