Microsoft beats Q1 estimates as Azure revenue jumps 48%

Microsoft ↘ 1.60% beat Wall Street's estimates for its fiscal first quarter after the bell on Wednesday. Azure revenue rose 48% to $33.17 billion, well ahead of the company's guidance of about 45%, and the shares rose more than 4% in after-hours trading, Yahoo Finance reported. This was the first quarter under Microsoft's new two-segment structure and the first time it reported Azure sales in dollars, so investors could measure its return on AI spending more directly.finance.yahoo.com

Results top forecasts

Revenue for the quarter ended Sept. 30 rose 19% to $92.3 billion. Adjusted earnings were $4.89 per share, excluding the effect of Microsoft's OpenAI investments, and GAAP earnings were $4.92, according to the company's release. Analysts had expected $4.73 per share on revenue of $90.69 billion, CNBC reported, citing LSEG. Analysts polled by StreetAccount had put Azure at $32.32 billion.cnbc.com+1

The new Agents and Infra segment, which includes Azure and Microsoft 365, brought in $76.8 billion, up 25%. Devices and Consumer fell 3% to $15.5 billion, and Windows OEM and devices revenue dropped 22%. Microsoft Cloud revenue rose 30% to $63.9 billion. "Results exceeded expectations across revenue, operating income, and earnings per share," Chief Financial Officer Amy Hood said in the release. Commercial remaining performance obligation, a measure of contracted future revenue, rose 73% to $677 billion.microsoft.com

Capex and cash flow

Spending on property and equipment came to $39.37 billion in the quarter, about double the $19.39 billion a year earlier, the company's cash flow statement showed. Microsoft had guided to more than $50 billion for the quarter, including finance leases and a lease reclassification, according to its July earnings call. Cash from operations rose to $58 billion from $45.1 billion.microsoft.com+1

Free cash flow has become a key test for the company. CNBC noted that rivals Alphabet ↘ 1.02% and Amazon Amazon.com, Inc. ↘ 1.96% both had negative free cash flow in the June quarter. During the quarter, Microsoft also announced 4,800 job cuts, and this week it offered buyouts to as many as 60,000 employees.cnbc.com

Calls and what's next

Before the report, options were pricing a move of about 5.1% through Friday, investingLive reported. The stock had gained 36% since Microsoft's July 29 report, Bloomberg reported. Alphabet was also scheduled to report Wednesday evening. Both reports followed a split Federal Reserve decision to hold rates, Yahoo Finance noted.investinglive.com+2

The release did not include guidance. Microsoft will give its outlook on a conference call at 5:30 p.m. ET, the company said.microsoft.com