Microsoft reports 19% revenue growth as Azure revenue rises 48% – Unite.AI

Microsoft on October 28, 2026 announced results for its first fiscal quarter 2027, ending September 30, 2026, reporting revenue of $92.3 billion, up 19% year over year, and net income of $36.6 billion, up 32% on a GAAP basis. Azure revenue increased 48%.

Operating profit was $45.9 billion and increased 21%, or 22% in constant currency. Diluted earnings per share were $4.92, up 32% on a GAAP basis. On a non-GAAP basis, which excludes the impact of investments in OpenAI, net income was $36.4 billion, up 18%, and diluted earnings per share were $4.89, also up 18%. According to the release, Microsoft presents constant currency data to show underlying performance excluding the effect of foreign currency rate fluctuations.

“We are delivering greater capacity, choice, control and cost efficiencies for customers across our entire stack,” said Satya Nadella, Microsoft president and CEO, in the company’s announcement. Nadella said the company is helping organizations build and own their intelligence, gaining trust through agent safety.

Amy Hood, Microsoft’s executive vice president and chief financial officer, said Microsoft Cloud revenue was $63.9 billion, with growth accelerating to 30% year-over-year, or 31% in constant currency. Hood said results exceeded expectations in terms of revenue, operating income and earnings per share.

Segment results and cloud metrics

Revenue in the Agents & Infra segment was $76.8 billion, up 25%, while revenue in the Devices & Consumer segment was $15.5 billion, down 3%. Commercial residual performance obligation increased 73% to $677 billion.

According to the release, across product and service lines, Microsoft 365 commercial cloud revenue increased 17% on a reported basis and 18% on an adjusted basis, with the adjusted figure normalized to a one-point lead from revenue recognition in the prior-year period. Microsoft 365 consumer cloud revenue increased 17 percent, industry cloud solutions revenue increased 10 percent, and search and advertising revenue, excluding traffic acquisition costs, increased 12 percent. Xbox content and services revenue fell 2%, and OEM and Windows device revenue fell 22%.

The release’s revenue table shows that Azure reached $33.2 billion for the quarter, up from $22.4 billion in the same period a year ago. Microsoft 365 cloud revenue was $27.8 billion, search and advertising revenue was $6.6 billion, Xbox revenue was $5.4 billion, and OEM and Windows device revenue was $3.6 billion.

The two-segment structure is new for fiscal 2027. Microsoft announced segment reporting changes in September 2026, creating the Agents and Infrastructure segment, which brings together its Applications and Agents, its multi-model system and Azure infrastructure, and the Devices and Consumers segment, which includes its core consumer offerings. Previous period amounts have been restated to conform to the new structure.

OpenAI Relationship and Investment Disclosures

Microsoft’s quarterly report on Form 10-Q reveals $10.0 billion in revenue from commercial agreements with OpenAI, including revenue sharing payments, for the three months ended September 30, 2026. Receivables from OpenAI totaled $7.2 billion as of September 30, 2026, up from $6.0 billion as of June 30, 2026.

The filing states that Microsoft has made total financing commitments of $13.0 billion related to its investment in OpenAI, of which $12.0 billion was funded as of September 30, 2026. The investment is accounted for under the equity method and represents an approximately 24% interest in OpenAI on a converted basis. According to the document, Microsoft calculates profits or losses under the equity method using the hypothetical liquidation-at-book-value method because its liquidation rights and priorities differ from the underlying ownership interests.

Other revenue for the quarter included $272 million in net profits from investments in OpenAI, versus $4.1 billion in net losses in the year-ago quarter, the filing said. The non-GAAP reconciliation of the earnings release removes such effects: Net earnings increased net income and diluted earnings per share by $207 million and $0.03 in the latest quarter, while net losses reduced them by $3.1 billion and $0.41 in the prior-year quarter.

Cash flow, capital spending and shareholder returns

Net cash from operations was $58.0 billion for the quarter. According to the company’s cash flow statement, investments in property and equipment totaled $39.4 billion, compared to $19.4 billion in the year-ago quarter.

Microsoft returned $10.2 billion to shareholders in the form of dividends and share repurchases during the quarter, and the 10th quarter shows cash dividends declared of $0.98 per common share. As of September 30, 2026, cash, cash equivalents and short-term investments were $64.5 billion and total assets were $779.4 billion. The document reports 7,426,194,552 shares of common stock outstanding as of October 22, 2026.

Nadella, Hood, Chief Accounting Officer Alice Jolla, Deputy General Counsel and Corporate Secretary Brian DeFoe and Vice President of Investor Relations Jonathan Neilson were scheduled to host a conference call and webcast at 2:30 PM Pacific Time (5:30 PM Eastern Time) on October 28, 2026, to discuss quarterly performance and certain forward-looking information. Microsoft said it will provide forward-looking guidance on the call and that the webcast will be available for replay until the close of business on October 28, 2027.