Microsoft Q1: Azure Revenue Up 48% to $33.2bn

Microsoft has put a quarterly dollar figure on Azure. Its results for the quarter to 30 September, the first of its 2027 financial year, show Azure revenue of $33.2 billion, up 48% from $22.4 billion a year earlier. Total revenue rose 19% to $92.3 billion, and operating income rose 21% to $45.9 billion.

It is also the first quarter reported under Microsoft’s new two-segment structure, and spending on property and equipment roughly doubled from a year earlier. Chief financial officer Amy Hood said “Results exceeded expectations across revenue, operating income, and earnings per share.” Shares rose 4% in extended trading, CNBC reported.

In brief

Azure revenue was $33.2bn, up 48%; Microsoft Cloud revenue was $63.9bn, up 30%.
Additions to property and equipment rose to $39.4bn from $19.4bn a year earlier.
Net income rose 32% to $36.6bn, helped by a swing in Microsoft’s OpenAI accounting.

Two segments replace three

Microsoft now reports two segments instead of Productivity and Business Processes, Intelligent Cloud and More Personal Computing, the three it used until July. CNBC says the old structure had lasted 11 years. A Form 8-K filed the same day recasts earlier years to match and says the change was first described in a filing on 2 September.

Agents and Infra, the far larger segment, “brings together our applications and agents, our multi-model system, and Azure infrastructure”, according to the filing. Devices and Consumer covers search and advertising (Bing, Edge, MSN and parts of LinkedIn), XBOX, and Windows OEM and devices, including Surface.

Segment	Revenue	Change	Operating income	Change
Agents and Infra	$76.8bn	+25%	$40.6bn	+24%
Devices and Consumer	$15.5bn	-3%	$5.4bn	+2%
Total	$92.3bn	+19%	$45.9bn	+21%

Source: Microsoft FY27 Q1 earnings release, segment results table, 28 October 2026. Quarter to 30 September; changes year on year.

Within Agents and Infra, Microsoft 365 commercial cloud revenue grew 17% and Microsoft 365 cloud revenue as a whole reached $27.8 billion. In Devices and Consumer, search and advertising revenue excluding traffic acquisition costs grew 12%, XBOX content and services fell 2%, and Windows OEM and devices revenue fell 22% to $3.6 billion.

Profit and the OpenAI line

Net income rose 32% to $36.6 billion, or $4.92 a share, from $27.7 billion, or $3.72. Part of that comes from Microsoft’s stake in OpenAI. The release says OpenAI-related items added $207 million to net income this quarter, or $0.03 a share, against a $3.1 billion hit, or $0.41 a share, a year earlier. Excluding those items, net income rose 18% to $36.4 billion and earnings per share were $4.89, against $4.13. CNBC said analysts polled by LSEG had expected $4.73 a share on revenue of $90.69 billion.

Chief executive Satya Nadella said: “We are delivering greater capability, choice, control, and cost efficiency for customers across our entire stack.” Commercial remaining performance obligation, contracted revenue not yet recognised, rose 73% to $677 billion.

Why the Azure dollar figure matters

Until now, Microsoft’s quarterly releases gave Azure only as a growth rate: in July it said “Azure and other cloud services revenue increased 43%”, alongside Nadella’s statement that annual Azure revenue had “surpassed $100 billion for the first time”. CNBC called this quarter’s disclosure the first time Microsoft had reported Azure revenue in dollars. The recast filing puts Azure, now defined as consumption services across both non-GPU and GPU workloads, including Foundry, at $101.9 billion for the year to June.

The dollar figure makes it clear how much of the company now rests on Azure. By TSN’s arithmetic, Azure was about 36% of revenue this quarter and accounted for $10.8 billion, or roughly three quarters, of the $14.6 billion increase in total revenue. It is now larger than Microsoft 365 cloud, the next-biggest line in the release. The segment change makes the same point. Agents and Infra brought in more than four-fifths of revenue, and its operating margin held at about 53% even as its cost of revenue rose 35%.

That makes Azure growth the number investors will watch each quarter. It also groups Microsoft’s Foundry developer tools and GPU rental in the same reported business, so outsiders still cannot separate AI demand from ordinary cloud use.

Spending is running ahead of cash

The cash flow statement shows the cost of that growth. Additions to property and equipment, Microsoft’s cash capital spending, were $39.4 billion, up from $19.4 billion a year earlier. That is about 43% of revenue, against 25% a year earlier. CNBC put total capital expenditure including finance leases at $45.2 billion.

Operating cash flow rose 29% to $58.0 billion, but less than spending. Subtracting additions to property and equipment leaves $18.6 billion, against $25.7 billion a year earlier. CNBC said free cash flow fell 27% to $18.63 billion. Microsoft still returned $10.2 billion to shareholders through dividends and buybacks.

The money is going into data centres, power and chips such as Maia 300, along with long power contracts like its deal with NiSource in Indiana. For now the 48% Azure growth and the $677 billion of contracted revenue give Microsoft an answer to critics who say AI has shown little payoff outside Big Tech. The test is whether revenue keeps rising faster than spending.