Microsoft Reports Strong Azure Growth and Higher Net Income as Cloud Demand Surges

UPDATE - follow-up to Microsoft stock jumps 4% as cloud growth drives earnings and revenue beat: Microsoft shares rose 4% in extended trading after the company reported quarterly results driven by 48% growth in its Azure cloud infrastructure business.

Financial Results

Microsoft's revenue grew 19% year over year in the quarter, with Azure now its biggest single business and reaching $33.17 billion in revenue. Net income increased to $36.63 billion, or $4.92 per share, up from $27.75 billion, or $3.72 per share, a year ago. Adjusted earnings exclude a roughly $200 million loss on its investment in OpenAI. 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.

Capital and Guidance

Microsoft reported $45.2 billion in capital expenditures and finance leases during the quarter, up about 30% from a year earlier. Around 75% of capital expenditures are now tied to short-lived assets such as Intel chips and Nvidia graphics processing units. Free cash flow declined 27% to $18.63 billion. For the fiscal second quarter, Microsoft called for $96 billion to $97.1 billion in revenue, with finance chief Amy Hood anticipating 49% to 50% growth for Azure at constant currency.

Context

Major technology companies are currently spending heavily on data center infrastructure to meet surging demand for artificial intelligence tools. Microsoft continues to generate positive free cash flow despite these massive investments, setting it apart from some industry peers.