Microsoft reports $92.3B quarter as Azure grows 48% and cloud backlog reaches $677B

What Microsoft reported

Microsoft reported results for its fiscal first quarter of 2027, which ended on 30 September 2026. Revenue was $92.279 billion, up 19% from $77.673 billion a year earlier. Operating income rose 21% to $45.9 billion. Net income was $36.6 billion, up 32%, or $4.92 per share. Excluding the effect of its OpenAI investments, net income was $36.4 billion, up 18%. Gross margin rose to $62.6 billion from $53.6 billion, while cost of revenue climbed 24% to $29.7 billion.

The release uses two segments. Agents and Infra brought in $76.8 billion, up 25%. Devices and Consumer brought in $15.5 billion, down 3%, as Windows OEM and devices revenue fell 22% and Xbox content and services fell 2%. Search and advertising revenue excluding traffic acquisition costs rose 12%.

Azure, cloud and the backlog

Azure revenue grew 48%. Microsoft Cloud revenue was $63.9 billion, up 30%, which CFO Amy Hood described as accelerating growth. Microsoft 365 commercial cloud revenue grew 17% as reported, or 18% after adjusting for a one-off benefit in the prior year. Commercial remaining performance obligation, which measures contracted revenue not yet recognized, rose 73% to $677 billion. Microsoft 365 consumer cloud revenue rose 17% and industry solutions cloud revenue 10%.

CEO Satya Nadella framed the quarter around helping organizations build and own their own intelligence and around agent safety and security. Hood said results exceeded expectations across revenue, operating income and earnings per share. Microsoft returned $10.2 billion to shareholders through dividends and buybacks.

Spending on capacity

Additions to property and equipment were $39.367 billion in the quarter, about twice the $19.394 billion a year earlier. Cash from operations rose to $58.0 billion from $45.1 billion, so Microsoft still funds its build-out from operating cash, unlike Alphabet this quarter. Cash, equivalents and short-term investments fell to $64.5 billion from $76.8 billion at the end of June. In the quarter Microsoft also repaid $4.85 billion of debt and spent $4.38 billion buying back its own shares. The release does not split capital spending between data center buildings, servers and finance leases.

Why it matters and what to watch

A $677 billion backlog growing faster than revenue suggests that much of Microsoft's AI demand is already contracted for years ahead. Azure's 48% growth and Alphabet's 103% cloud growth, reported the same evening in Alphabet's results, show the cloud providers are still selling all the AI capacity they can bring online. Guidance and any capex outlook are given on the 5:30 p.m. ET call, not in the release. More results are in AI Business & Funding.

Questions people ask

How fast did Azure grow in Microsoft's fiscal Q1 2027?

Azure revenue increased 48% year over year in the quarter ended 30 September 2026, according to Microsoft's release.

What is Microsoft's commercial remaining performance obligation?

It is contracted commercial revenue not yet recognized. It rose 73% to $677 billion at the end of the quarter.

How did OpenAI affect Microsoft's results?

Net gains from OpenAI investments added $207 million to net income, or $0.03 per share. A year earlier, OpenAI-related losses cut net income by $3.1 billion.

Sources

1. Microsoft Announces First Quarter Results (Microsoft Corp. (SEC Form 8-K, Exhibit 99.1), 28 Oct 2026)
2. Microsoft investor relations (Microsoft, 28 Oct 2026)