Microsoft stock jumps after hours as Azure grows 48% and earnings beat estimates

Microsoft shares climbed in extended trading Wednesday after the company reported fiscal first-quarter results that topped Wall Street’s expectations, led by 48% growth in its Azure cloud business. CNBC reported the stock rose about 4% after hours, while Reuters put the gain at about 6% at the time of its report; after-hours moves can swing and often shift by the next morning’s open.

This article is for information only and is not financial advice.

Microsoft earnings: the key numbers

For the quarter ended Sept. 30, according to CNBC and Reuters:

• Revenue: $92.28 billion, up 19% from a year earlier, vs. $90.69 billion expected (LSEG)
• Adjusted earnings per share: $4.89 vs. $4.73 expected
• Net income: $36.63 billion, or $4.92 per share, up from $27.75 billion a year ago
• Azure revenue: $33.17 billion, up 48%, ahead of estimates of about $32.3 billion to $32.8 billion
• Free cash flow: $18.63 billion, down 27%

Adjusted earnings exclude a roughly $200 million loss on Microsoft’s investment in OpenAI, CNBC said. Azure is now Microsoft’s biggest single business, and this was the first time the company reported Azure revenue in dollars rather than only as a growth rate.

Why is Microsoft stock up?

Investors have grown wary of how much Big Tech is spending on AI data centers, and how it’s being financed. Reuters said the results signaled Microsoft’s heavy AI investments were paying off. It noted that shrinking cash flows and rising debt at tech companies, plus last week’s selloff after Meta raised its spending forecast and announced plans to sell new stock, had unsettled markets.

Microsoft stood out because it is still generating free cash flow. CNBC contrasted it with Alphabet, which reported more than $9 billion in negative free cash flow for the quarter, and Meta, whose cash flow turned negative for the first time. Finance chief Amy Hood said Microsoft will keep generating free cash flow through fiscal 2027.

The outlook helped too. Microsoft guided to $96 billion to $97.1 billion in fiscal second-quarter revenue, above the $95.60 billion analysts expected. Hood projected Azure growth of 49% to 50% at constant currency, well above the roughly 45% consensus. “We still have demand that exceeds supply,” she said.

How much is Microsoft spending on AI?

Capital expenditures, including finance leases, were $45.2 billion, up about 30% from a year earlier but below the $50.67 billion analysts had projected. Hood said some third-party capacity deliveries expected in the quarter were delayed and shifted to the second half of the fiscal year.

She said Microsoft is aiming for more than $50 billion in second-quarter capex and $170 billion for calendar 2027, CNBC reported. About 75% of spending now goes to short-lived assets such as chips and GPUs.

Copilot, Windows and the new segments

Microsoft now reports two segments. “Agents and Infra,” which includes Azure and Microsoft 365, grew almost 25% to $76.8 billion. “Devices and Consumer” slipped 3% to $15.48 billion, as sales of devices and Windows licenses fell 22% amid higher memory costs and weak PC demand. CEO Satya Nadella said Microsoft 365 Copilot usage rose 50% from the previous quarter, but the company didn’t disclose paid seats.

Buyouts and job cuts

The report lands days after Microsoft offered buyouts to as many as 60,000 employees, following 4,800 job cuts announced during the quarter, CNBC noted, as the company tries to balance its costly AI build-out with efficiency.

How has MSFT stock done this year?

Through Wednesday’s close, Microsoft shares were up about 9% to 10% for the year, according to Reuters and CNBC, trailing the S&P 500’s roughly 13% gain.

FAQ