Microsoft (MSFT) FY2027 Q1 Earnings: Azure Revenue Grows 48% to $33.17 Billion

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2026-10-30 16:28 (UTC+8)

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Microsoft reported Q1 FY2027 revenue of $92.28 billion, up 19% year-over-year, beating market expectations. Azure revenue rose 48% to $33.17 billion, disclosed as a standalone figure for the first time, with growth expected to reach 49% to 50% next quarter. Shares rose about 4% after hours as capital expenditure came in below expectations.

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Microsoft released its fiscal year 2027 first-quarter earnings on October 28, with revenue reaching $92.28 billion, up 19% year-over-year, exceeding the $90.69 billion expected by LSEG.

Azure revenue grew 48% to $33.17 billion—the first time Microsoft has separately disclosed Azure revenue in dollar terms. The company also expects Azure revenue growth of 49% to 50% in the next quarter.

According to CNBC, Microsoft shares rose about 4% in after-hours trading as capital expenditures came in below expectations and free cash flow beat market forecasts.

On MEXC, the MSFTUSDT perpetual contract rose 2.7% in the first hour after the earnings release, and by 9:00 p.m. ET, gains had reached 3.1%.

Key Takeaways

Revenue: $92.28 billion, up 19% year-over-year, above the $90.69 billion expected by LSEG; non-GAAP earnings per share (EPS) came in at $4.89, beating the expected $4.73.
Azure: Revenue grew 48% to $33.17 billion, above the restated 42% growth in the prior quarter and exceeding Microsoft's original guidance of 44% to 45%.
Capital expenditures: Capex including finance leases was $45.2 billion, below the company's prior expectation of more than $50 billion, mainly due to delays in the delivery of some third-party compute capacity.
Remaining performance obligations: Commercial remaining performance obligations (RPO) grew 73% year-over-year to $677 billion, roughly flat versus the prior quarter.
Outlook: Second-quarter revenue guidance is $96 billion to $97.1 billion, above the LSEG consensus of $95.6 billion.
MEXC market data: MSFTUSDT rose from 532.05 USDT to 546.33 USDT in the first hour after the earnings release, peaked at 568.39 USDT during the earnings call, and the funding rate remained at 0%.

Microsoft FY2027 Q1 Earnings: Core Data

Microsoft's fiscal year begins on July 1, so fiscal year 2027 first quarter covers July through September 2026. The following data comes from Microsoft's earnings announcement.

Revenue: $92.28 billion, up 19% year-over-year.
Operating income: $45.92 billion, up 21% year-over-year.
Net income (GAAP): $36.63 billion, up 32% year-over-year.
Diluted EPS: GAAP EPS was $4.92 and non-GAAP EPS was $4.89, compared with $3.72 and $4.13, respectively, in the year-ago period.
Microsoft Cloud revenue: $63.9 billion, up 30% year-over-year.
Shareholder returns: Returned $10.2 billion to shareholders through dividends and share repurchases.

The non-GAAP figures exclude only the impact of Microsoft's investment in OpenAI. That investment generated a $207 million gain this quarter, compared with a $3.1 billion loss in the year-ago period, which is why GAAP EPS grew faster than non-GAAP EPS.

Microsoft Restructures Business Segments, Discloses Azure Revenue in Dollars for the First Time

Microsoft now reports two business segments instead of the previous three, and has recast historical period data under the new structure.

Agents and Infra: Revenue of $76.8 billion, up 25% year-over-year, covering Azure, Microsoft 365 cloud services, and server licensing.
Devices and Consumer: Revenue of $15.48 billion, down 3% year-over-year, covering Windows, hardware devices, Xbox, and search.

According to Reuters, Azure revenue reached $33.17 billion, above the $32.84 billion expected by Visible Alpha.

The 48% growth rate this quarter uses Microsoft's narrower Azure definition introduced in September, which excludes GitHub and some other developer and industry cloud services. Under the same methodology, Azure grew 42% in the prior quarter, rather than the 43% originally reported. Therefore, 48% versus 42% is the accurate comparable growth rate.

In other businesses, Microsoft 365 commercial cloud revenue grew 17%; search and advertising revenue excluding traffic acquisition costs grew 12%; Windows OEM and devices revenue fell 22% to $3.55 billion.

Microsoft Cloud gross margin fell to 66% from 68% in the year-ago period. Microsoft attributed the change to a revenue mix shift toward Azure.

Capex Below Expectations, Free Cash Flow Beats Market Forecasts

Including finance leases, Microsoft's capital expenditures this quarter were $45.2 billion, up about 30% year-over-year, but below the $50.67 billion expected by StreetAccount.

On the earnings call, Microsoft said some third-party capacity originally scheduled for delivery this quarter was pushed to subsequent quarters. In addition, about three-quarters of spending went to shorter-lived assets such as chips and servers.

Operating cash flow grew 29% year-over-year to $58 billion, and free cash flow was $18.6 billion, far above the $8.54 billion expected by Visible Alpha cited by Reuters.

Commercial remaining performance obligations (RPO) reached $677 billion, up 73% year-over-year, with about 30% expected to be recognized as revenue over the next 12 months. However, commercial bookings fell 12%.

What Guidance Did Microsoft Give for FY2027 Q2?

Revenue: $96 billion to $97.1 billion, up 18% to 19% year-over-year.
Agents and Infra: $80.1 billion to $80.7 billion.
Azure growth: Expected to grow 49% to 50% at constant currency, above the StreetAccount consensus of 45.1%.
Operating margin: Expected to decline slightly from the year-ago period.
Capital expenditures: Expected to exceed $50 billion next quarter. After accounting for capacity delivery delays, calendar year 2026 capex is approximately $170 billion.

Microsoft said it expects to remain free cash flow positive in fiscal year 2027.

According to Reuters, the cost guidance also includes estimates related to the voluntary separation program Microsoft confirmed on October 26. The program involves approximately 60,000 employees.

In our previous Microsoft FY2027 Q1 earnings preview, Azure growth of about 45% was seen as an important market expectation threshold. Both the actual results and next-quarter guidance exceeded that level.

How Did MSFT Contracts on MEXC React After the Earnings Release?

After Microsoft's earnings were released, the MSFTUSDT perpetual contract on MEXC immediately began repricing and continued to fluctuate during the earnings call.

Hourly closing prices and trading volume for MEXC MSFTUSDT from 8:00 a.m. to 9:00 p.m. ET on October 28, 2026. Source: MEXC public contract API.

Price: MSFTUSDT closed the hourly candle from 3:00 p.m. to 4:00 p.m. ET at 532.05 USDT. In the first hour after the earnings release, the price peaked at 565.39 USDT, briefly up 6.3%, but the hour ultimately closed at 546.33 USDT, a gain of 2.68%. During the earnings call from 5:00 p.m. to 6:00 p.m., the price reached a high of 568.39 USDT. By 9:00 p.m., the contract price was 548.30 USDT, up 3.05%.

Trading activity: Trading volume in the first hour after the earnings release was approximately 9.53 million USDT, about 70 times the average hourly volume over the prior 24 hours. Volume over the five hours after the U.S. market close was approximately 15.85 million USDT, more than five times the 3.03 million USDT traded between 9:00 a.m. and 4:00 p.m. ET.

Premium to index price: In the first hour after the earnings release, the contract closed about 10 basis points above the index price; in the second hour, it flipped to about 30 basis points below the index price, the widest spread of the evening, reflecting sharp volatility during the earnings call. The spread then remained within about 5 basis points.

Funding rate: MSFTUSDT settles funding every eight hours. The funding rate was 0% at every settlement over the past two days, including the first post-earnings settlement at 00:00 UTC on October 29. Even with the sharp increase in trading activity, the cost of holding long positions did not rise.

Frequently Asked Questions (FAQ)

Did Microsoft's FY2027 Q1 earnings beat expectations?

Yes. Microsoft's revenue reached $92.28 billion, above the $90.69 billion expected by LSEG; non-GAAP EPS was $4.89, beating the expected $4.73. Azure revenue reached $33.17 billion, also exceeding analyst forecasts.

How much did Azure grow in FY2027 Q1?

Azure revenue grew 48% to $33.17 billion, with growth of 48% at both reported and constant currency, above the restated 42% in the prior quarter.

What is Microsoft's guidance for FY2027 Q2?

Microsoft expects second-quarter revenue of $96 billion to $97.1 billion, Azure growth of 49% to 50% at constant currency, and capital expenditures of more than $50 billion.

Why do Microsoft's GAAP and non-GAAP EPS differ?

Microsoft's non-GAAP results exclude the impact of its investment in OpenAI. That investment generated a $207 million gain this quarter, so GAAP EPS was $4.92, slightly above non-GAAP EPS of $4.89.

What are Microsoft's new financial reporting segments?

Starting in fiscal year 2027, Microsoft uses two reporting segments: Agents and Infra, which includes Azure and Microsoft 365 cloud services; and Devices and Consumer, which includes Windows, hardware devices, Xbox, and search.