Microsoft Fiscal Q1 Beats Estimates as Azure Grows 48% to $33.2 Billion; Shares Jump After Hours

MSFT reported fiscal first-quarter 2027 revenue of $92.3 billion on Oct. 28, up 19% from a year earlier and ahead of the $90.69 billion analysts expected. Adjusted earnings per share rose 18% to $4.89 against a $4.73 estimate, and operating income climbed 21% to $45.9 billion versus a $44.06 billion forecast. The shares rose more than 5% in after-hours trading.

Azure drove the beat. Azure and other cloud services revenue reached $33.2 billion, up 48% both as reported and in constant currency, against the roughly 45% growth analysts had forecast; Futurum CEO Daniel Newman noted the company had guided to 44% to 45%. Total Microsoft Cloud revenue rose 30% to $63.9 billion. Elsewhere, Search and advertising revenue of $6.6 billion and Xbox revenue of $5.4 billion both topped estimates, while Industry Solutions revenue of $5.3 billion came in slightly short.

Spending came in lighter than feared. Capital expenditure totaled $39.4 billion, below the $46.59 billion analysts expected, which Newman attributed to supply-chain constraints, data centers waiting to be energized and lease timing rather than a pullback. He also pointed out that Microsoft has funded its buildout without raising debt or issuing equity, unlike other hyperscalers. Microsoft returned $10.2 billion to shareholders in the quarter and booked a $207 million net gain related to OpenAI, worth 3 cents a share.

The one soft spot was backlog. Commercial remaining performance obligation stood at $677 billion, short of the $705.6 billion estimate, and Newman said it was roughly flat from the prior quarter though up about 73% from a year earlier. For MSFT, the next tests are whether Azure can hold growth near 48% as new capacity comes online, and whether the lighter capex quarter was timing, as management commentary on the call will clarify.