REDMOND, WASHINGTON / ConSynSer / – Microsoft’s cloud business powered a strong start to its fiscal year, with Microsoft Cloud revenue rising 30% to $63.9 billion. The company reported the results on Wednesday, October 28, for the quarter ended September 30. Net income climbed to $36.63 billion from $27.75 billion a year earlier, a gain of about 32%. Earnings per share rose to $4.92 from $3.72. Total revenue grew 19% to $92.28 billion.
Azure, Microsoft’s cloud computing platform, grew 48%, outpacing the company’s guidance of 44% to 45%. Microsoft reported Azure revenue in dollars for the first time, at $33.17 billion. Operating income increased 21% to $45.9 billion. On an adjusted basis, earnings were $4.89 per share, compared with analyst expectations of $4.73. Revenue beat the analyst estimate of $90.69 billion. Shares gained about 4% in after-hours trading following the release.
Chief Financial Officer Amy Hood said the company beat expectations on revenue, operating income and earnings per share. Chairman and Chief Executive Satya Nadella said Microsoft is helping customers build their own AI systems while delivering greater capability and efficiency. Nadella also highlighted the company’s focus on strengthening trust through security. The goal, Nadella said, is to turn innovation into tangible impact across industries. Hood noted that Microsoft has not yet needed to tap debt markets.
Agents and Infra segment grows 25%
The quarter was the first under Microsoft’s new two-segment reporting. Agents and Infra, which spans Azure, Microsoft 365 and server licensing, posted $76.8 billion in revenue, up 25%. Devices and Consumer, which includes Windows, Xbox and advertising, slipped 3% to $15.48 billion. Higher memory and storage prices weighed on PC-related sales, Nadella said. Usage of Microsoft 365 Copilot increased 50% from the prior quarter. The new Microsoft 365 E7 bundle has reached millions of seats, Hood said.
Spending on AI infrastructure remained heavy. Capital expenditure including finance leases totaled $45.2 billion, about 30% higher than a year earlier but below analyst projections as high as $50.67 billion. Roughly 75% went to short-lived assets such as graphics and central processing units. Hood told analysts that demand still outstrips supply. The commercial backlog reached $677 billion, up 73%. Free cash flow fell 27% to $18.63 billion.
Outlook tops Wall Street forecasts
Microsoft guided fiscal second-quarter revenue to between $96 billion and $97.1 billion, above the roughly $95.6 billion consensus. Azure is expected to grow 49% to 50% in constant currency, compared with analyst estimates near 45%. The forecast suggests cloud demand remains strong heading into the end of 2026. Investors had flagged the results as a key test during a crowded week of Big Tech earnings.
The company returned $10.2 billion to shareholders in the quarter, including $7.3 billion in dividends and $2.9 billion in buybacks. Microsoft raised its quarterly dividend 8% to $0.98 per share in September. Beyond the cloud, Microsoft has also unveiled AI research such as a diagnostic tool that doubled physician accuracy on complex cases. Investors continue to weigh returns on the company’s AI spending. The next dividend is payable on December 10.