Microsoft on Wednesday reported fiscal first-quarter revenue and profit ahead of analysts’ expectations, with Azure revenue growth climbing 40%.
The earnings report comes as the company deals with the lingering effects of a widespread cloud outage that began earlier in the day.
Microsoft beats expectations
The company’s capital expenditure reached $34.9 billion – reflecting the long-term buildout of cloud infrastructure to “Microsoft beats expectations” meet the demand for artificial intelligence. That’s up from $24.2 billion in Q4. Microsoft had projected capital expenditures of more than $30 billion for Q1.
Along with that unprecedented buildout, Microsoft sought to address investor concerns about a potential AI bubble by highlighting its commercial residual performance obligation (RPO), a measure of future contracted revenue. That backlog grew 51% year over year to $392 billion.
The company also revealed for the first time that the weighted average duration of this RPO is about two years, a move intended to show investors “Microsoft beats expectations” that its record capital spending is backed by strong, long-term customer demand.
Revenue was $77.7 billion in the quarter ended Sept. 30, Microsoft’s first quarter of 2026. That’s up 18%, and compared to the average analyst expectation of $75.39 billion. The company said the result was driven by strong demand for cloud and AI services.
Profit was $27.7 billion, or $3.72 per share, beating expectations of $3.66 per share.
Earlier on Wednesday, an Azure cloud service outage disrupted operations for customers worldwide, including Alaska Airlines, Xbox users and Microsoft 365 subscribers. Microsoft reported early this afternoon that it was rolling back the faulty configuration and that customers should see improvements.
Microsoft stock fell nearly 3% in after-hours trading. The company’s market value reached $4 trillion after announcing its new OpenAI deal Tuesday morning.