Microsoft Reports $33.2 Billion in Azure Revenue, Up 48%, and Projects $170 Billion in 2027 Capital Spending

Microsoft reported a strong quarter on Wednesday, Oct. 28, and handed investors something it had never given them before: Azure's revenue in dollars.

Azure brought in $33.2 billion in the quarter ended Sept. 30, up 48% from a year earlier. Microsoft's own forecast, given by CFO Amy Hood in July and restated after a September change in how Azure is defined, was growth of 44% to 45% in constant currency. Analysts had expected about $32.3 billion.

Total revenue was $92.3 billion, up 19% and above the $90.75 billion analysts expected, according to Yahoo Finance. Earnings were $4.89 a share excluding the impact of the OpenAI investment, against expectations of $4.72. Net income rose to $36.63 billion, or $4.92 a share, from $27.75 billion a year ago.

Microsoft shares rose in extended trading after the report. Gains were about 4% at one point and 2.6% later in the session, according to different accounts of after-hours action. The stock was up about 9% for the year through Wednesday's close.

A new way of reporting

The Azure disclosure comes with a new reporting structure. Microsoft now splits the company into two segments, Agents and Infra, and Devices and Consumer. Agents and Infra, which combines Azure with Microsoft 365's cloud business, generated $76.8 billion, up 25%.

The dollar figure allows a direct comparison with rivals. Alphabet reported Wednesday that Google Cloud, which includes Workspace, took in $30.7 billion, up 103%. Azure is slightly larger. Google's cloud business grew about twice as fast. Amazon reports Thursday, Oct. 29, and will add AWS to the comparison.

The spending side

Microsoft spent $45.2 billion on capital expenditures including finance leases, up about 30% from a year earlier. That was below its own forecast of more than $50 billion and below the $50.67 billion analysts surveyed by StreetAccount projected. Hood told analysts that "some third-party capacity deliveries we expected in Q1 were delayed."

The delay moves spending, it does not shrink it. Hood said fiscal second-quarter capex will exceed $50 billion and that calendar 2027 spending will reach about $170 billion. She said capex growth will accelerate in the second half of the fiscal year, driven by CPUs, higher memory and storage costs, GPUs and the capacity deliveries that slipped.

About 75% of capex now goes to short-lived assets such as Nvidia GPUs and Intel chips, up from about 66% in the previous three quarters and half in the year-ago quarter.

Free cash flow fell 27% to $18.63 billion, though that was roughly $10 billion above analyst expectations. Hood said Microsoft will keep generating free cash flow through fiscal 2027 but will tap additional funding sources "when it's attractive to do so."

What the guidance says

For the fiscal second quarter, Microsoft guided to revenue of $96 billion to $97.1 billion. LSEG analysts had predicted $95.60 billion. For Azure, Hood expects growth of 49% to 50% in constant currency, compared with a 45.1% StreetAccount consensus.

"We still have demand that exceeds supply," Hood said. That puts Azure's growth rate at the mercy of how fast Microsoft can build and switch on capacity.

CEO Satya Nadella said in a statement: "By helping organizations build and own their own intelligence, and earning trust through agent safety and security, we are translating our innovation into growing adoption."

The OpenAI dependence

In its filing, Microsoft said it recorded $10 billion in revenue from commercial arrangements with OpenAI in the quarter, including revenue-sharing payments. That is nearly 11% of total revenue. For all of fiscal 2026, the figure was $24.1 billion.

Receivables from OpenAI, money owed for past transactions, rose to $7.2 billion from $6 billion at the end of June.

Microsoft has not said how much of the $10 billion came from revenue sharing and how much from Azure services. OpenAI committed in October 2025 to buy an additional $250 billion of Azure services. Under an April 2026 agreement, it continues sharing revenue with Microsoft through 2030, subject to a cap, while being free to use rival clouds. Microsoft's ownership stake in OpenAI slipped to 24% in September from about 25% in June, and the company did not say what caused the dilution.

The worry Wall Street still has

The quarter lands in a market jittery about Big Tech's AI bills. Alphabet reported negative free cash flow of $9.07 billion, and its shares fell 8% in extended trading despite the cloud doubling. Meta said last week that its cash flow turned negative for the first time.

Jesse Cohen, senior analyst at Investing.com, called Microsoft's report "about as clean as it gets for a company this size." He added: "After Meta's and Alphabet's numbers revived AI-spending anxiety, this is the counterweight."

The counterweight has limits. Microsoft's cash flow fell 27% in a quarter when it spent less than planned, and it has now told investors the spending is heading toward $170 billion in 2027. The test comes in the second half of the fiscal year, when that capex accelerates and Azure has to keep growing near 50% to justify it. Amazon's AWS numbers on Thursday will show how the largest cloud provider is holding up in the same race.