Microsoft Q1 Revenue Rises 19% to $92.3 Billion as Azure Grows 48%

Microsoft Corp. on October 28, 2026, reported revenue of $92.3 billion for the first quarter of fiscal 2027, an increase of 19% from the corresponding period a year earlier, with Azure revenue up 48% and operating income up 21% to $45.9 billion. The results, covering the three months ended September 30, 2026, were published in the company’s fiscal first-quarter earnings release datelined Redmond, Washington.

Net income was $36.6 billion and increased 32% on a GAAP basis, while diluted earnings per share was $4.92, also up 32%. On a non-GAAP basis, which Microsoft defines as excluding the impact from investments in OpenAI, net income was $36.4 billion, up 18%, and diluted earnings per share was $4.89, up 18%, or 19% in constant currency. Operating income growth was 22% in constant currency.

“We are delivering greater capability, choice, control, and cost efficiency for customers across our entire stack,” said Satya Nadella, chairman and chief executive officer of Microsoft. He said the company is translating its innovation into growing adoption and real-world impact across every industry.

Amy Hood, executive vice president and chief financial officer, said Microsoft Cloud revenue was $63.9 billion for the quarter, with growth accelerating to 30% year over year, or 31% in constant currency. “Results exceeded expectations across revenue, operating income, and earnings per share,” she said.

Commercial remaining performance obligation increased 73% to $677 billion. Microsoft 365 commercial cloud revenue increased 17% on a reported basis and 18% on an adjusted basis, a figure Microsoft (MSFT ) said is normalized for a one-point benefit from in-period revenue recognition in the prior year. Microsoft 365 consumer cloud revenue increased 17%, and industry solutions cloud revenue increased 10%.

Segment and Product Results

Revenue in the Agents and Infra segment was $76.8 billion and increased 25%, with the segment table showing revenue of $76,795 million compared with $61,672 million a year earlier and operating income of $40,558 million compared with $32,718 million. Devices and Consumer revenue was $15.5 billion, down 3%, with operating income of $5,357 million versus $5,243 million. Microsoft said it recast certain prior-period amounts to reflect the fiscal 2027 changes to its segments announced in September 2026.

Within Devices and Consumer, search and advertising revenue excluding traffic acquisition costs increased 12%, Xbox content and services revenue decreased 2%, and Windows OEM and Devices revenue decreased 22%.

The company’s product and service revenue table shows Azure revenue of $33,165 million, compared with $22,384 million in the prior-year quarter. Microsoft 365 cloud revenue was $27,778 million, up from $23,694 million. Productivity and server licensing revenue was $8,407 million, down from $8,678 million. Search and advertising revenue was $6,554 million, up from $5,942 million. Xbox revenue was $5,379 million, down from $5,508 million. Industry solutions revenue was $5,337 million, up from $4,894 million. Windows OEM and devices revenue was $3,551 million, down from $4,551 million. Frontier and support services revenue was $2,108 million, up from $2,022 million.

Product revenue overall declined to $14,631 million from $15,922 million, while service and other revenue rose to $77,648 million from $61,751 million. Gross margin was $62,559 million, compared with $53,630 million a year earlier. Research and development expense was $9,047 million, up from $8,146 million. Sales and marketing expense was $5,716 million, compared with $5,717 million, and general and administrative expense was $1,881 million, up from $1,806 million.

OpenAI Impact and Cash Flow

Microsoft said that in the first quarter of fiscal 2027, net gains from investments in OpenAI increased net income by $207 million and diluted earnings per share by $0.03. In the first quarter of fiscal 2026, net losses from investments in OpenAI decreased net income by $3.1 billion and diluted earnings per share by $0.41. The release’s reconciliation table states a net year-over-year impact from OpenAI of $(3,293) million on net income and $(0.44) on diluted earnings per share.

Other income (expense), net, was income of $38 million for the quarter, compared with net expense of $3,660 million a year earlier. Income before income taxes was $45,953 million, and the provision for income taxes was $9,324 million, compared with $6,554 million in the prior-year quarter.

Net cash from operations was $58,000 million, compared with $45,057 million a year earlier. Additions to property and equipment were $39,367 million, compared with $19,394 million. Microsoft returned $10.2 billion to shareholders in the form of dividends and share repurchases during the quarter; the cash flow statement shows common stock cash dividends paid of $6,757 million and common stock repurchased of $4,379 million, along with debt repayments of $4,850 million.

Cash, cash equivalents, and short-term investments totaled $64,509 million at September 30, 2026, compared with $76,843 million at June 30, 2026. Total assets were $779,403 million, long-term debt was $31,090 million, and total stockholders’ equity was $470,509 million, compared with $442,387 million at the end of June.

Microsoft said it would provide forward-looking guidance on its earnings conference call and webcast scheduled for 2:30 p.m. Pacific time on October 28, 2026. Nadella, Hood, chief accounting officer Alice Jolla, deputy general counsel and corporate secretary Brian DeFoe, and investor relations vice president Jonathan Neilson were set to host the session, with a replay available through the close of business on October 28, 2027.