5 minBusiness
Microsoft beats profit and revenue estimates as Azure cloud growth accelerates
Microsoft reported first-quarter revenue of $92.3 billion and profit of $36.6 billion, both above Wall Street expectations, driven by strong demand for its Azure cloud and AI services even as spending on data centers climbs.
Microsoft posted first-quarter results that topped Wall Street forecasts, with revenue reaching $92.3 billion, up 19% from a year earlier and above what analysts had expected. The company also reported a profit of $36.6 billion, which edged past analyst predictions, and its earnings beat expectations by $0.17 per share.
The strongest signal in the report came from Azure, the company's cloud business, which grew 48%, ahead of analyst estimates. Demand for Microsoft's artificial intelligence services remains robust as the Redmond, Washington-based company works to bring more computing capacity online. Shares were initially trading up more than 4% in after-hours trading following the release.
Investors have been watching closely to see whether Azure can keep growing at a high pace and whether the company's AI products are generating solid revenue. Both metrics are seen as indicators of whether demand for AI is holding up, particularly as major technology firms spend heavily on data centers. Microsoft said its quarterly capital expenditures were $45.2 billion, higher than the prior quarter but below what analysts had predicted. In its previous quarterly report, the company had said it expected capital expenditures in calendar 2026 to be roughly $175 billion.
Microsoft is one of several so-called hyperscalers spending aggressively to meet AI computing demand. Amazon, Microsoft, Alphabet, the parent of Google, and Meta Platforms are collectively expected to devote more than $700 billion to capital expenditures in 2026, mostly for data centers. Meta said last week that its capital spending this year could rise to as much as $145 billion. Alphabet reported cloud gains on Wednesday but weaker advertising performance, and Amazon was scheduled to report on Thursday.
Microsoft did not initially provide a specific update on Copilot sales, but said its 5% growth in Microsoft 365 commercial seats reflected Copilot sales. In its previous report, the company said Copilot had 30 million paid users, up from 20 million the quarter before. Copilot had a slow start, which has made investor interest in its growth a closely watched point. This year Microsoft reimagined the service as a “super app” spanning coding, chat and autonomous functions, and recently unveiled Windows features that let users work with AI agents.
The results arrive during a period of significant change at the 51-year-old company. This week Microsoft offered buyouts to roughly 60,000 employees, about 27% of its workforce, as it continues a company-wide pivot toward AI that has pressured it to cut costs. Eligible employees must accept by the first week of December, though Microsoft expects fewer than 10% of employees will take the offer. In July the company cut about 4,800 jobs, following more than 15,000 layoffs in 2025.
Many of the recent cuts have been concentrated in the struggling Xbox unit, which has weighed on overall financial performance. On Wednesday Microsoft said Xbox content and services revenue fell 2%, while hardware revenue dropped 14%. Windows OEM and Devices revenue decreased 22%, weighing on the Devices and Consumer segment.
Microsoft has benefited from the AI boom mainly through its cloud computing service, which helps AI companies train their models and make them available through Azure. The company has also worked to balance the needs of its partners against those of its own proprietary AI models. Earlier this week, Anthropic released the prospectus for its upcoming initial public offering, which showed that Anthropic has committed to spending at least $44.9 billion on Microsoft compute between this November and May 2033, regardless of actual usage. That is part of a commitment of at least $389.9 billion in compute spending across companies including Amazon, Alphabet and SpaceXAI.
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