Tech · $MSFT
Microsoft Rises After Hours as Azure Grows 48% and Cash Flow Tops Forecasts
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Fiscal first-quarter revenue rose 19% to $92.3 billion, while capital spending came in below the company's own projection.
By Noris Ortiz ·
Microsoft shares rose about 4% in extended trading on Wednesday after the software company reported faster-than-expected growth in its Azure cloud business and free cash flow far above analyst forecasts [1].
For the fiscal first quarter ended Sept. 30, Microsoft said revenue rose 19% to $92.3 billion and operating income increased 21% to $45.9 billion [2]. Net income on a GAAP basis climbed 32% to $36.6 billion, or $4.92 per diluted share [2]. Excluding the impact of its investments in OpenAI, net income rose 18% to $36.4 billion, or $4.89 per share [2].
Azure revenue grew 48% [2]. Reuters reported that Azure brought in $33.17 billion in the quarter, above the $32.84 billion analysts had expected according to Visible Alpha, and up from $29.4 billion in the previous quarter [1]. Revenue from the broader Microsoft Cloud reached $63.9 billion, up 30% [2].
The quarter was the first under a new reporting structure. Microsoft now discloses two segments: Agents and Infra, where revenue rose 25% to $76.8 billion, and Devices and Consumer, where revenue fell 3% to $15.5 billion [2].
"Results exceeded expectations across revenue, operating income, and earnings per share," Chief Financial Officer Amy Hood said in the release [2].
Spending and cash flow were central for investors who have grown wary of the cost of the AI buildout. Capital expenditures rose to $45.2 billion from $34.9 billion a year earlier but came in below the roughly $50 billion Microsoft had projected for the quarter, Reuters reported [1]. Free cash flow was $18.6 billion, more than double the $8.54 billion analysts had forecast, according to Visible Alpha data cited by Reuters [1]. Microsoft also returned $10.2 billion to shareholders through dividends and buybacks [2].
Before the report, the stock had gained about 9% so far this year through Wednesday's close, Reuters said [1].
Why it matters for markets: Microsoft is one of the largest companies in the S&P 500, and its results are closely watched as a gauge of whether corporate demand for AI services is translating into revenue fast enough to justify heavy data-center investment. On the same evening, Alphabet fell sharply after hours as its free cash flow turned negative, and Microsoft's ability to grow cloud revenue while generating strong cash gave investors a different read on the economics of AI spending [3].
What to watch next: how the after-hours gain holds once regular trading opens on Thursday, management's outlook for Azure growth and capital spending in the current quarter, and whether lower-than-projected capital expenditures reflect timing or a change in plans.
Sources:
[1] Reuters via Euronext, "Microsoft beats quarterly cloud revenue estimates", October 28, 2026. https://live.euronext.com/en/financial-news/microsoft-beats-quarterly-cloud-revenue-estimates
[2] Microsoft, "Microsoft announces first quarter results", October 28, 2026. https://news.microsoft.com/source/2026/10/28/microsoft-announces-first-quarter-results-2/
[3] Reuters via Virginia Business, "Wall Street ends higher as Fed holds key rate steady, focus turns to earnings", October 28, 2026. https://virginiabusiness.com/wall-street-rises-fed-holds-rates-steady-earnings/
This article was produced with AI assistance. It is for informational purposes only and is not financial advice. StockVolt and its authors may hold positions in securities mentioned.