Microsoft beats forecasts as Azure accelerates and AI spending surges
Quarterly revenue reached $92.28 billion and adjusted earnings per share came to $4.89, both above expectations. Azure grew 48%, even as Microsoft spent $45.2 billion on capital expenditures and finance leases.
Microsoft’s cloud business is growing faster even as the cost of supporting the artificial intelligence boom puts pressure on cash flow, underscoring the financial balancing act facing technology companies racing to build the infrastructure behind AI.
Azure revenue reached $33.17 billion in Microsoft’s fiscal first quarter, rising 48% from a year earlier, the company disclosed Wednesday. The growth rate accelerated from 42% in the previous quarter and exceeded analysts’ expectations, offering a clearer picture of the scale of Microsoft’s cloud business as demand for AI computing drives investment in data centers.
The results helped lift Microsoft shares 5% in extended trading. Total revenue for the quarter ended September 30 rose 19% year over year to $92.28 billion, ahead of the $90.69 billion forecast by analysts surveyed by LSEG. Adjusted earnings per share came in at $4.89, compared with expectations of $4.73. The adjusted figure excludes the impact of Microsoft’s investments in OpenAI.
But the growth comes with a substantial infrastructure bill. Microsoft recorded $45.2 billion in capital expenditures and finance leases during the quarter, up about 30% from a year earlier. While the figure was below the $50.67 billion projected by analysts surveyed by StreetAccount, it highlights the scale of the resources being committed to expand computing capacity for AI.
Free cash flow fell 27% to $18.63 billion, a reminder that strong revenue growth does not necessarily translate into more cash available after the costs of expansion. The pressure is not unique to Microsoft. Alphabet, a rival in cloud computing, reported negative free cash flow for the quarter, while Meta said last week that it had also moved into negative territory.
The market’s response to Microsoft’s results suggests investors welcomed the stronger-than-expected performance, particularly Azure’s acceleration. Yet the figures also sharpen the question hanging over the AI infrastructure race: how much investment will be required to meet demand, and what will that spending mean for the cash these companies generate?
