Microsoft Azure Revenue Grows 48% as Quarterly Capex Hits $45 Billion

Microsoft's Azure cloud revenue grew 48% to $33.2 billion in the quarter ended September 30, the company reported on Wednesday. It was the first time Microsoft disclosed Azure revenue in dollar terms, and the figure topped analysts' expectations of $32.32 billion. Microsoft Cloud revenue reached $63.9 billion, up 30%.

The quarter offers a direct read on the AI build-out: demand kept accelerating while spending came in lower than planned. Capital expenditure including finance leases totaled $45.2 billion, up 30%, against analyst projections of $50.67 billion. That was also below Microsoft's own target of about $50 billion, which Bernstein attributed to delays in adding data center capacity.

Microsoft's contracted pipeline grew faster still. Commercial remaining performance obligation, revenue under contract but not yet recognized, rose 73% to $677 billion. The release does not say how much of that backlog is tied to OpenAI or any other single customer.

On the earnings call, CFO Amy Hood guided for more. She said Azure growth should reach 49% to 50% in the second quarter, helped by engineering improvements that let Microsoft meet extra capacity needs in the first quarter. Hood said capital expenditures would exceed $50 billion in the current quarter and reach about $170 billion for calendar 2026, Fortune reported. She also said roughly 75% of capital spending now goes to short-lived assets such as chips and GPUs. Despite that spending, Hood said Microsoft expects to remain free cash flow positive.

Total revenue was $92.3 billion, up 19%, and operating income was $45.9 billion, up 21%. Adjusted earnings per share of $4.89 beat Wall Street's forecast of $4.73, and revenue topped the $90.69 billion consensus; shares rose about 4% in after-hours trading.

Microsoft now reports non-GAAP results that exclude the effect of its OpenAI investments, which added $207 million to net income in the quarter after reducing it by $3.1 billion a year earlier. Its largest segment, renamed Agents and Infra in September, brought in $76.8 billion, up 25%.

Chief Executive Satya Nadella pointed to "earning trust through agent safety and security" as part of Microsoft's pitch to customers.

Microsoft did not break out AI revenue on its own, the share of its backlog from OpenAI, or the cost of the Voluntary Exit Offer it announced on Monday, as AI Briefing News reported.