Microsoft (MSFT) Beats Q1 Estimates as Azure Growth Speeds Up to 48%

Microsoft (MSFT) reported revenue of $92.28 billion for its fiscal first quarter, the three months to September, up 19% year on year and ahead of the $90.69 billion analysts expected, according to LSEG data cited by CNBC. Earnings excluding the effect of its OpenAI stake came to $4.89 a share, against the $4.73 analysts expected, according to SiliconANGLE, which did not name a data provider. The shares rose 4.0% in after-hours trading to $552.22 as of 5:53 p.m. ET.

What stood out

Azure, Microsoft’s cloud-computing business, grew faster than the 44% to 45% the company itself had forecast. For the first time, the company also gave Azure’s revenue in dollars: $33.2 billion for the quarter, SiliconANGLE and StockTitan reported. The wider Microsoft Cloud, which adds Office and other online services, brought in $63.9 billion, up 30%.

Customers have also signed up for far more than Microsoft has delivered. Its commercial remaining performance obligation, the value of contracts not yet turned into revenue, rose 73% to $677 billion, the release showed.

“Results exceeded expectations across revenue, operating income, and earnings per share,” Chief Financial Officer Amy Hood said in the release. Operating income rose 21% to $45.9 billion.

Not everything grew. Revenue in Devices and Consumer, the smaller of Microsoft’s two newly drawn reporting segments, fell 3% to $15.5 billion, while Agents and Infra rose 25% to $76.8 billion. The adjusted earnings figure leaves out Microsoft’s share of OpenAI’s results, which added $207 million to net income this quarter after a $3.1 billion hit a year earlier, the release said.

The outlook

Microsoft expects revenue of $96.0 billion to $97.1 billion in the December quarter, growth of 18% to 19%, Hood said on the call. SiliconANGLE put analysts’ expectation at $95.6 billion, without naming a data provider. She forecast Azure growth of 49% to 50% in constant currency, above the 45.1% SiliconANGLE said analysts had modeled.

Spending was the surprise. Capital expenditure, the money spent on data centers and chips, came to $45.2 billion, about $5.5 billion below the average analyst estimate of roughly $50.7 billion cited by FXLeaders, which did not name a provider. “Capital expenditures were $45.2 billion as some third-party capacity deliveries we expected in Q1 were delayed,” Hood said on the call, according to a transcript from TradingKey.

Our take

This was a clean beat: faster Azure growth, a forecast above estimates, and a $677 billion pile of signed contracts. The open question is the spending gap. If the delayed capacity arrives, Azure’s 49% to 50% forecast looks reachable. If deliveries slip again, growth could be capped by supply rather than demand. We’ll watch December-quarter capex against her outlook.