Microsoft (MSFT.US) Q1 revenue increased 19% year over year to nearly US$92.3 billion, Azure revenue surged 48%

The Zhitong Finance App learned that Microsoft (MSFT.US) announced financial results for the first quarter of the 2027 fiscal year on Wednesday. According to the data, the company's revenue for the quarter reached US$92.279 billion, up 19% year on year; GAAP net profit was US$36.629 billion, up 32% from US$27.747 billion in the same period last year; GAAP diluted earnings per share were US$4.92, up from US$3.72 in the same period last year, up 32% year on year.

Non-GAAP adjusted net profit reached $36.422 billion, up 18% year over year; adjusted earnings per share were $4.89, up from $4.13 in the same period last year, up 18% year over year. Microsoft said that non-GAAP results excluded the impact on OpenAI investments.

In terms of profitability, Microsoft's operating profit for the first fiscal quarter reached 45.915 billion US dollars, up 21% year on year and 22% at a fixed exchange rate; the operating profit margin was about 49.8%, up from 48.9% in the same period last year. The gross profit for the quarter was US$62,559 million, up about 17% year on year, and gross margin was about 67.8%.

Microsoft Chief Financial Officer Amy Hood said that the company had a strong start to the new fiscal year. Microsoft's cloud business revenue reached 63.9 billion US dollars, an increase of 30% over the previous year, and a 31% increase at a fixed exchange rate, further accelerating the growth rate. The company's revenue, operating profit and earnings per share for the quarter all exceeded internal expectations.

Azure revenue grows 48% Cloud business continues to benefit from AI needs

The cloud computing business continues to be an important driver of Microsoft's performance growth. In the first fiscal quarter, Microsoft Azure's revenue reached US$33.165 billion, up 48% from US$22.384 billion in the same period last year, reflecting the continued expansion of corporate demand for cloud computing and artificial intelligence infrastructure.

The overall revenue of Microsoft's cloud business reached US$63.9 billion, an increase of 30% over the previous year, and an increase of 31% at a fixed exchange rate. Meanwhile, Microsoft's remaining commercial performance obligations reached 677 billion US dollars, an increase of 73% over the previous year, indicating that the scale of commercial contracts that the company has signed but not yet confirmed as revenue continues to expand.

Microsoft 365 commercial cloud business revenue increased 17% year over year and increased 18% at a fixed exchange rate. If adjusted for the one-percentage point impact of revenue recognition in the same period last year, commercial cloud business revenue increased 18% year over year, and increased 19% at a fixed exchange rate. Microsoft 365 consumer cloud business revenue increased 17% year over year, and industry solution cloud business revenue increased 10% year over year.

Microsoft Chairman and CEO Satya Nadella said that the company is using a complete technology system to provide customers with more powerful capabilities, more choices, greater control and more cost-effective solutions.

Nadella pointed out that by helping enterprises build and master their own intelligent capabilities while strengthening the security and reliability of AI agents, Microsoft is promoting the wider application of innovative technologies in various industries and transforming them into actual business results.

Agents and Infra revenue growth of 25% under the new business structure

Notably, Microsoft has adjusted the division of business divisions since fiscal year 2027 and reclassified the business into two major segments: Agents and Infra (Intelligent Devices and Infrastructure) and Devices and Consumer (Device and Consumer Business).

Among them, Agents & Infra's revenue for the first fiscal quarter reached US$76.795 billion, up 25% year on year; operating profit was US$40.558 billion, up about 24% from US$32.718 billion in the same period last year. This division covers businesses such as Azure and Microsoft 365 cloud services as well as productivity and server licensing, and is currently Microsoft's main source of revenue and profit.

In contrast, the Devices and Consumer segment's revenue for the first fiscal quarter was US$15.484 billion, down 3% year on year; operating profit was US$5.357 billion, up about 2% year on year. Specifically, search and advertising revenue increased 12% year over year after excluding traffic acquisition costs; Xbox content and service revenue fell 2% year over year, down 1% at a fixed exchange rate.

Windows OEM and device business performance was relatively weak, with revenue falling 22% year over year. According to product and service revenue, Microsoft's Azure revenue for the first fiscal quarter was US$33.165 billion, Microsoft 365 cloud business revenue was US$27.778 billion; productivity and server licensing revenue was US$8.407 billion, search and advertising revenue was US$6.554 billion, and Xbox business revenue was US$5.379 billion.

OpenAI's return on investment affects GAAP profit performance

It is worth noting that Microsoft's GAAP net profit growth rate this quarter was significantly higher than the non-GAAP net profit growth rate, mainly related to the accounting impact on OpenAI investments. Microsoft disclosed that in the first quarter of fiscal year 2027, the net income from the investment in OpenAI increased the company's GAAP net profit by US$207 million, which is equivalent to an increase of 0.03 US dollars in diluted earnings per share.

In contrast, the net loss from investment in OpenAI in the same period last year reduced the company's net profit by about $3.1 billion and reduced earnings per share by $0.41 billion. As a result, after excluding the impact of OpenAI investment, Microsoft's adjusted net profit for the first fiscal quarter increased 18% year over year, and adjusted earnings per share increased 18% year over year, lower than the 32% increase under GAAP.

Capital expenditure doubled year over year, operating cash flow increased 29%

In terms of cash flow, Microsoft's cash flow from operating activities reached US$58 billion in the first fiscal quarter, an increase of about 29% over US$45.57 billion in the same period last year. At the same time, the company continues to increase investment in infrastructure. The quarter's capital expenditure for the purchase of property and equipment reached US$39.367 billion, an increase of about 103% over US$19.394 billion in the same period last year.

Microsoft's free cash flow for the first fiscal quarter was approximately US$18.633 billion, down from US$25.663 billion in the same period last year, based on the amount of cash flow from operating activities minus expenses for the purchase of property and equipment.

In terms of balance sheet, as of September 30, 2026, Microsoft held a total of US$64.509 billion in cash, cash equivalents and short-term investments, down from US$76.843 billion at the end of June 2026. Microsoft returned US$10.2 billion to shareholders in the first fiscal quarter through share repurchases and dividends. Of this, stock repurchase expenses were approximately US$4.379 billion, and cash dividend payments were approximately US$6.757 billion.