Microsoft's stock climbed 4.3% to $554.25 in extended trading on Wednesday after the company reported fiscal first-quarter results that surpassed Wall Street expectations. The rally came as investors welcomed accelerating growth in the Azure cloud business and a better-than-expected earnings performance.
The tech giant posted revenue of $92.28 billion for the quarter ended September 30, up 18.8% year over year and above the $90.62 billion analysts had projected, according to FactSet. Adjusted earnings per share came in at $4.89, exceeding the $4.71 consensus estimate, while net profit rose to $36.63 billion from $27.75 billion in the same period last year.
Azure growth accelerates
Azure was the standout performer, with revenue growth accelerating to 48% in the September quarter. That figure outpaced Microsoft's own guidance of 44% to 45% growth and the roughly 47% rate that institutional investors had been expecting. For the first time, Microsoft disclosed Azure's revenue in dollar terms, reporting $33.16 billion for the quarter.
Overall, Microsoft Cloud revenue increased 30% year over year to $63.9 billion. The company also introduced a new Agent and Infra reporting segment, which includes Azure and Microsoft 365 products, generating $76.8 billion in revenue. The strong cloud performance helped ease concerns about whether Microsoft's massive investments in artificial intelligence infrastructure would translate into meaningful financial returns.
AI spending remains in focus
Investors continue to scrutinize the hundreds of billions of dollars that major technology companies are committing to AI, questioning whether those investments will generate sufficient returns. Microsoft lowered its calendar-year 2026 capital expenditure forecast to about $175 billion from roughly $190 billion last quarter, a move that reflects an extension of the estimated useful life of its data centers and office buildings from 15 years to 25 years.
The spending outlook remains a key metric as tech firms expand computing capacity to support AI services. At the same time, data-center construction has faced growing public and political opposition in parts of the United States. New York Governor Kathy Hochul ordered a temporary ban on large data-center construction in July, while Pennsylvania Governor Josh Shapiro signed an executive order introducing restrictions on new projects earlier this year.
Workforce changes add to industry pressures
Microsoft's results come amid broader industry pressure to reduce workforce costs while increasing investment in AI. The company said on Monday that it was extending buyout offers to a section of its workforce. Around 60,000 employees are eligible for the program, according to a person familiar with the matter cited by The Wall Street Journal. Microsoft employed 223,000 people at the end of June.
In April, the company offered voluntary retirement buyouts to around 8,600 employees, with more than 30% accepting the offer. Microsoft expects a much lower acceptance rate for the latest program.
The earnings report provided a positive signal for the tech sector, which has been under pressure from concerns about AI spending and macroeconomic headwinds. Microsoft's ability to deliver strong cloud growth while managing costs suggests that the company is navigating the transition to AI-driven computing effectively.
This article is for informational purposes only and does not constitute financial advice.
