Key Highlights

● Fiscal first-quarter Revenue of $92.28 billion rose 19% and beat the $90.69 billion target.

● Azure revenue of $33.17 billion grew above 48%, with growth guided to 49% to 50%.

● Capex of $45.2 billion stayed below projections while free Cash Flow remained positive.

● Devices and Windows license sales dropped 22% as memory and storage costs hurt PC demand.

Microsoft (NASDAQ:MSFT) is in focus before Friday's open as the one megacap whose results investors have so far rewarded rather than punished. No confirmed pre-market quote for the stock was available as of about 8:30 a.m. ET, so its direction for the session is not yet clear. What is clear is the contrast: Alphabet (NASDAQ:GOOGL) fell 12.6% on Thursday, Amazon (NASDAQ:AMZN) was down about 7% pre-market and Intel (NASDAQ:INTC) about 25%.

The relative winner of a bruising Earnings week

"Microsoft spent less than feared and held up," one pre-market note wrote Friday. One senior market analyst said that "Microsoft's relatively stronger results offered a more constructive picture of monetization." The shares rose about 4% after hours on Wednesday following the report, according to a technology news report, then slipped 0.16% in Thursday's regular session.

What Microsoft reported

For its fiscal first quarter, Microsoft posted revenue of $92.28 billion, up 19% and ahead of a $90.69 billion target, and adjusted earnings of $4.89 a share against a $4.73 forecast, according to the same report. For the first time the company disclosed Azure revenue in dollars: $33.17 billion, versus analysts' $32.32 billion, with growth above 48%.

Guidance was also firm. Microsoft guided fiscal second-quarter revenue to $96 billion to $97.1 billion, above the $95.6 billion expected, and Azure growth of 49% to 50% in constant currency, versus a forecast of 45.1%.

The key difference from Alphabet and Amazon is spending. Capital Expenditure including finance leases was $45.2 billion, up about 30%, but below the $50.67 billion top of analyst projections. Free cash flow fell 27% to $18.63 billion, yet stayed solidly positive, while Alphabet's and Amazon's turned negative. Finance chief Amy Hood noted the company has not yet tapped Debt markets and said, "We still have Demand that exceeds supply." One auto-generated summary describes the capex as a miss versus an estimate, which conflicts with the reported figures and is unconfirmed.

The Windows warning, the risks and what to watch

The weak spot was the PC business. Microsoft now reports a Devices and Consumer segment, which includes Windows OEM licensing, Xbox and search advertising; that segment's revenue fell 3% to $15.48 billion. Devices and Windows license sales dropped 22% year over year, and chief executive Satya Nadella attributed weak PC demand to higher prices caused by rising memory and storage costs, according to the technology news report.

That message is echoing across hardware. Intel's chief executive Lip-Bu Tan said customers "began signaling a PC slowdown based on the memory prices and availability," and HP Inc. (NYSE:HPQ) was down about 10% pre-market at 8:23 a.m. ET, according to pre-market data, whose summary links the slide partly to Microsoft's Windows OEM commentary.

Microsoft is a component of the Dow Jones Industrial Average, where its high share price gives it one of the larger weights in the price-weighted average, as well as a top weight in the Nasdaq-100 and S&P 500. Holding steady would help explain why Dow futures were flat while Nasdaq-100 futures fell about 2.6% around 8 a.m. ET.

Risks include the possibility that investors lump Microsoft in with peers if AI cash-burn worries intensify, a prolonged PC slump, and higher-for-longer rates; the 10-year Yield sits near 4.94% to 4.99% and the Fed is weighing another hike. Next up are Apple (NASDAQ:AAPL)'s results on Monday, the midterm elections on Tuesday and the October jobs report on November 6. Microsoft's next Quarterly Report is expected in late January; no date has been confirmed.