Microsoft CEO Satya Nadella speaks at Axel Springer Neubau in Berlin on Oct. 17, 2023.
Ben Kriemann | Getty Images
Microsoft reported better-than-expected results for its fiscal first quarter as revenue in the company’s Azure cloud business jumped 40%. The stock slipped in extended trading.
- Earnings per share: $4.13 adjusted vs. $3.67 per share expected
- Revenue: $77.67 billion vs. $75.33 billion expected
Revenue increased 18% in the fiscal first quarter from $65.6 billion a year ago, according to a release. Net income rose to $27.7 billion, or $3.72 per share, from $24.67 billion, or $3.30 per share, during the same period last year.
Microsoft said its investment in OpenAI resulted in a $3.1 billion hit to net income in the quarter, equivalent to 41 cents per share.
Microsoft’s Intelligent Cloud unit, which includes Azure, reported $30.9 billion in revenue, up 28% from a year ago and above the StreetAccount consensus of $30.25 billion. Growth in Azure, which competes with Amazon Web Services and Google Cloud, also beat estimates, as analysts polled by StreetAccount had anticipated 38.2% expansion.
Cloud continues to be the big driver of growth at Microsoft, as the business has proven to be a major beneficiary of the AI boom. Last quarter, Microsoft disclosed the scale of its Azure cloud infrastructure business in dollars for the first time. The company said revenue in fiscal 2025 from Azure and other cloud services jumped 34% from the prior year to more than $75 billion.
Microsoft’s Productivity and Business Processes segment, which is home to Office productivity software and LinkedIn, delivered $33 billion in revenue for the first quarter, above the $32.33 billion consensus among analysts polled by StreetAccount.
The More Personal Computing unit, which includes Windows, search advertising, devices and video games, reported 4% growth to $13.8 billion in revenue. That was above StreetAccount’s $12.83 billion consensus.
Microsoft’s earnings landed hours after the company experienced an outage in Azure and its 365 services. Various websites and games were down for hours, and Microsoft said it expects recovery by this evening.
Microsoft shares are up 28% this year, as of Wednesday’s close, and hit a record a day earlier. Much of its AI momentum has been attributed to its tight relationship with OpenAI.
On Tuesday, OpenAI announced it has completed its restructuring and formally outlined Microsoft’s stake in the company. Under the new structure, OpenAI’s nonprofit will hold a 26% stake in its for-profit arm, worth about $130 billion. Microsoft will hold a 27% stake worth about $135 billion, and current and former employees and investors will own the remaining 47%.
Microsoft is scheduled to hold its quarterly call with investors at 5:30 p.m. ET.
Analysts will be listening closely to the company’s capital expenditures as it races to build out the infrastructure necessary to support AI demand.
Microsoft said in July that it expected to spend $30 billion in capex and assets acquired through leases during the quarter, representing annual growth of more than 50%. CFO Amy Hood told investors at the time that capex will grow in fiscal 2026, but it will be a slowdown from 2025.
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