Microsoft Beats Forecasts as Azure Growth Accelerates to 48%

In a week when investors punished heavy AI spending, Microsoft was the exception. Microsoft earnings for the September quarter, released on 28 October, beat expectations on revenue and profit. Azure grew 48%, and the shares rose about 3-4% in after-hours trading, XTB reported.

What did the Microsoft earnings show?

According to Microsoft’s earnings release for the first quarter of its 2027 fiscal year:

• Revenue rose 19% to $92.3 billion, ahead of forecasts of about $91 billion.
• Operating income rose 21% to $45.9 billion.
• Adjusted earnings per share rose 18% to $4.89, against expectations near $4.72.
• Microsoft Cloud revenue grew 30% to $63.9 billion.
• Commercial remaining performance obligations, the contracted revenue still to be delivered, jumped 73% to $677 billion.

Azure’s 48% growth beat the company’s own earlier guidance of about 45% in constant currency. CFO Amy Hood said demand continues to exceed supply.

Why Microsoft escaped the sell-off

Alphabet fell more than 12% the next day, and Amazon slid after its results a day later. Both showed huge spending alongside weaker cash generation. Microsoft’s numbers read differently.

Capital spending rose 103% to $39.4 billion, but that was below the roughly $50 billion the market expected. Free cash flow stayed positive at $18.6 billion, though it now covers only about half of net income, down from 92% a year earlier.

There is a catch. Microsoft extended the estimated useful life of its data centres and buildings from 15 to 25 years, which shifts some agreements from finance leases to operating leases. That lowers reported capex without a matching cut in real investment, XTB noted. Investors comparing hyperscalers should keep that change in mind.

The AI usage numbers

CEO Satya Nadella said he has “never been more confident in the opportunity ahead.” In posts reported by Livemint, he said daily users of Copilot rose nearly 50% from the previous quarter. He also said Microsoft’s Agent 365 platform has passed 50 million agents, and Foundry revenue more than tripled. These are company figures and have not been independently verified.

What It Means for Enterprise Leaders

For investors, Microsoft shows what the market now rewards: fast AI growth, spending that looks controlled, and cash flow that stays positive. Accounting choices can flatter that picture, so the next full-year results will matter.

For businesses, the agent numbers stand out. Fifty million agents means agents are becoming everyday enterprise software, with all the governance questions that brings, as traced in Agentic AI Trends 2026. Hood’s comment that demand exceeds supply also means Azure AI capacity may stay tight, a limit we covered in AI Data Center Power Constraints 2026.

This article is for information only and is not investment advice.