Microsoft stock jumps 4% as cloud growth drives earnings and revenue beat

Key points

• Microsoft shares rose 4% after hours as quarterly results beat expectations, driven by 48% Azure growth.
• Azure became Microsoft's biggest single business, with revenue disclosed at $33.17 billion for the quarter.
• Microsoft guided fiscal second-quarter revenue to $96–$97.1 billion and projected Azure growth of 49–50% at constant currency.

Microsoft shares climbed 4% in extended trading on Wednesday after the company reported better-than-expected quarterly results for the period ended Sept. 30. The software giant's Azure cloud infrastructure business grew 48%, and Azure is now its biggest single business.

Revenue rose 19% year over year, and net income increased to $36.63 billion, or $4.92 per share, from $27.75 billion, or $3.72 per share, a year earlier. Adjusted earnings excluded a roughly $200 million loss on Microsoft's investment in OpenAI.

Capital spending and cash flow

Microsoft reported $45.2 billion in capital expenditures and finance leases for the quarter, up about 30% from a year earlier and below the $50.67 billion analysts had projected. Free cash flow fell 27% to $18.63 billion.

Finance chief Amy Hood said some third-party capacity deliveries expected in the first quarter were delayed. She said about 75% of capital expenditures are now tied to short-lived assets such as Intel chips and Nvidia GPUs, up from about 66% in the past three quarters and half a year ago.

We still have demand that exceeds supply

— Amy Hood

Outlook and segment results

For the fiscal second quarter, Microsoft guided revenue to $96 billion to $97.1 billion, representing 18.8% growth at the middle of the range. Hood said she expects Azure growth of 49% to 50% at constant currency.

Revenue in the Agents and Infra segment rose almost 25% to $76.8 billion, while Devices and Consumer revenue slipped 3% to $15.48 billion. Sales of devices and Windows licenses declined 22%, which the company attributed to higher memory and storage costs, the end of support for Windows 10 and weak PC demand.