Key Highlights

  • Adjusted diluted EPS of USD 4.89 rose 18% from USD 4.13 and topped the USD 4.72 consensus estimate.
  • Revenue of USD 92.3 billion grew 19%, while Microsoft Cloud revenue of USD 63.9 billion grew 30%.
  • Azure revenue increased 48%, and commercial remaining performance obligation grew 73% to USD 677 billion.
  • Capital expenditures reached USD 45.2 billion, while free cash flow of USD 18.6 billion reflected that heavy investment.

Microsoft Corporation (NASDAQ:MSFT) reported fiscal first-quarter 2027 revenue of USD 92.3 billion, up 19% from USD 77.7 billion a year earlier and above a consensus estimate of USD 90.62 billion. Adjusted diluted earnings per share, which exclude gains and losses on the OpenAI investment, were USD 4.89, compared with USD 4.13 a year earlier and a consensus estimate of USD 4.72. GAAP diluted earnings per share were USD 4.92, up 32%, with the OpenAI investment adding USD 0.03 this year against a USD 0.41 drag in the prior-year quarter.

Operating income rose 21% to USD 45.9 billion, and net income reached USD 36.6 billion. Operating expenses grew 6%, and total company headcount declined 2%. CEO Satya Nadella described a fast start to the fiscal year and pointed to Copilot daily users up nearly 50% from the prior quarter.

Segments, Cloud Mix and Cash Flow

Agents and Infra revenue of USD 76.8 billion grew 25%, led by Azure, which increased 48% as Foundry revenue more than tripled and underused CPU capacity was monetized. Microsoft Cloud revenue grew 30%, though its gross margin percentage fell to 66% on the shift toward Azure. Microsoft 365 Commercial Cloud revenue rose 17% as reported, and paid commercial seats grew 5%.

Devices and Consumer revenue fell 3% to USD 15.5 billion. Windows OEM and devices revenue dropped 22%, with Windows OEM down 27% against a prior-year boost from Windows 10 end of support and elevated channel inventory. Search and advertising revenue excluding traffic acquisition costs grew 12%. Operating cash flow was USD 58 billion, up 29%, and the company returned USD 10.2 billion through dividends and repurchases.

Capacity Delays and Second-Quarter Guidance

Capital expenditures of USD 45.2 billion included USD 7.4 billion of finance leases, and roughly three-quarters went to short-lived assets such as CPUs and GPUs. The company's chief financial officer said some third-party capacity deliveries slipped, and that customer demand continues to exceed available supply.

For the second quarter, management guided to total revenue of USD 96 billion to USD 97.1 billion, Azure growth of 49% to 50% in constant currency, and capital expenditures above USD 50 billion. Calendar-year capital spending is projected near USD 170 billion. Operating expense guidance includes the cost of a recently announced employee voluntary exit offer, and the second-quarter effective tax rate is projected near 20%.

Items to Monitor

Four readings stand out. Azure growth is guided to 49% to 50% in constant currency after 48% this quarter. Capital spending is guided above USD 50 billion, with third-party deliveries shifted into the second half. Commercial remaining performance obligation of USD 677 billion has a weighted average duration of 2.3 years, with about 30% recognized within 12 months. Windows OEM and devices revenue is guided to decline in the mid-30s percentage range, against 22% this quarter. Commercial bookings fell 12% on tough comparisons with large prior-year Azure commitments.