For years, Microsoft gave investors Azure's growth rate but never its actual revenue. That ended Wednesday. For the first time, the company reported Azure revenue in dollars: $33.2 billion for the quarter ending in September, up 48% from a year earlier. Analysts had expected about $32.3 billion. Azure is now Microsoft's biggest single business.
Total revenue rose 19% to $92.28 billion, and adjusted earnings were $4.89 per share. Both beat Wall Street's estimates, and the stock rose about 4% in after-hours trading.
CFO Amy Hood said demand still exceeds supply. She expects Azure to grow 49% to 50% in constant currency this quarter, well ahead of the roughly 45% analysts were predicting. To keep up, Microsoft spent $45.2 billion on capital expenditures and finance leases last quarter. It plans to spend more than $50 billion this quarter and about $170 billion in the calendar year 2027. Some capacity from outside GPU providers arrived late, so part of that spending will move into the second half of the year.
That spending is starting to show up elsewhere in the results. Free cash flow dropped 27% to $18.63 billion. Even so, Microsoft is still generating cash, while Alphabet and Meta have both reported negative free cash flow. On the consumer side, device and Windows licence sales fell 22% as rising memory and storage costs pushed prices up.
The company also reorganised its reporting into two segments, "Agents and Infra" and "Devices and Consumer". It had used three segments for the past 11 years. Satya Nadella said Microsoft 365 Copilot users grew 50% from last quarter, though Microsoft didn't share paid seat counts. All of this follows a costly week: Microsoft has offered buyouts to as many as 60,000 employees as it tries to pay for the AI buildout.
