Microsoft last night reported stronger-than-expected results for the quarter that ended in September, the first quarter of its 2027 fiscal year, and the stock rose about 4% in after-hours trading on Wall Street. According to CNBC, revenue was $92.3 billion, up 19%, against an analyst forecast of $90.7 billion. Adjusted earnings per share reached $4.89, above the expected $4.73.
Azure in dollars, for the first time
This is the first report in which Microsoft shows revenue from Azure, its cloud service, in figures rather than only as a growth rate. According to TechCrunch, Azure brought in $33.2 billion in the quarter, up 48% from a year earlier, above the roughly $32.3 billion analysts expected. The company's CFO expects Azure to grow 49% to 50% next quarter. Microsoft set its total revenue forecast for next quarter, $96 billion to $97.1 billion, above market expectations.
The new structure
Microsoft now reports in two segments. The Agents and Infra segment, which includes the cloud and business software, grew 25% to $76.8 billion. The Devices and Consumer segment fell 3% to $15.5 billion.
The price of AI
Alongside the strong numbers, spending keeps climbing. According to CNBC, capital spending including finance leases reached $45.2 billion in the quarter, up about 30%, but below the $50.7 billion analysts expected. Free cash flow fell 27%. The upshot: Microsoft is showing that its AI investment is starting to pay off in the cloud, but it still consumes a large share of its cash.
What it means for Israel
Microsoft is one of the largest employers in Israeli high-tech, with R&D centers in Herzliya, Tel Aviv, Haifa and Beersheba, and a significant part of its cybersecurity and cloud work is developed here. Strong Azure growth is also good news for hundreds of Israeli companies that sell products on its cloud.
