Q1 FY2027 results
| Metric | Result | Change |
|---|---|---|
| Revenue | $92.3 billion | up 19% |
| Operating Income | Increased 21% | 22% in constant currency |
| Earnings per share | $4.89 | up 18% |
| Microsoft Cloud Revenue | $63.9 billion | up 30% |
| Azure Revenue | Increased 48% | Not stated |
| Commercial Remaining Performance Obligation | $677 million | grew 73% |
Guidance and outlook
- Total company revenue is expected to be between $96 billion and $97.1 billion for the second quarter.
- Azure revenue growth is expected to be 49% to 50% in constant currency for the second quarter.
- Microsoft Cloud gross margin percentage is expected to be roughly 65% for the second quarter.
- Capital expenditures are expected to be over $50 billion in the second quarter.
- For the calendar year, total capital expenditure spend is expected to be approximately $170 billion.
How management sounded
Positive (+7 on our -10 to +10 scale). Management highlighted accelerating cloud growth and strong demand for AI agents, while noting that customer demand continues to exceed available supply. Management sounded more upbeat than on 48% of the 190 calls we cover; most companies sound positive on their own calls, so the comparison says more than the label.
Q&A summary
AI Return Drivers
Asked: Adam Wood from Morgan Stanley asked about the primary driver of returns: utilization and unit costs or monetizing layers like Fabric, Foundry, and Copilot.
Answer: Satya Nadella stated that returns will come from all layers, noting that the infrastructure is fungible and the value compounds when these integrated systems are used together.
Azure Growth Drivers
Asked: Karl Keirstead from UBS asked about the drivers for the 49% to 50% Azure growth guidance.
Answer: Amy Hood attributed the performance to engineering efficiencies in platform utilization, token pricing variability, and the ability to monetize underutilized capacity within the existing fleet.
Enterprise vs. Native AI Demand
Asked: Mark Moerdler from Bernstein asked about the mix of enterprise versus digitally native customers in Azure AI.
Answer: Satya Nadella noted that enterprise breadth is starting, with companies deploying complex agentic systems for supply chain and business processes, moving beyond experimental projects to reliable, cost-managed systems.
Capital Strategy
Asked: Tal Liani from Bank of America asked about the strategy for raising capital.
Answer: Amy Hood stated that the company has flexibility through leasing and debt markets, but currently remains free cash flow positive and confident in the returns on capital expenditures.
What to watch before the next call
- The timing and scale of engineering efficiencies and new capacity additions, which impact Azure growth rates.
- Potential volatility in commercial bookings due to the timing of large Azure commitments.
- The impact of token pricing variability on Azure revenue growth.
