Microsoft's Azure Grows 48% as Cloud Spending Hits $45.2 Billion

Microsoft added 24 new data centers across five continents during the quarter ending in September. The expansion helped the company meet rising demand for its Azure cloud platform, which grew revenue 48% year over year. That figure beat analyst estimates of 44% growth reported and 45% in constant currency.

Revenue for the period totaled $92.28 billion, an increase of about 19% from a year earlier. That result cleared the $90.69 billion projected by LSEG consensus estimates. Adjusted earnings per share reached $4.92, up 32% from the prior year, surpassing the $4.73 forecast. Azure revenue specifically came to $33.17 billion, compared with $22.38 billion in the same quarter last year.

The company's disclosure of quarterly Azure revenue is new. Microsoft announced changes to its reporting structure in September.

Microsoft's shares have climbed roughly 51% since their low in late June. Earlier in the year, the stock had dropped about 25% and traded in the mid-$300s amid questions about its position in artificial intelligence and the vulnerability of its subscription model. Following the earnings report, shares rose another 3% in after-hours trading, reaching record highs.

Capital expenditures, including finance leases, totaled $45.2 billion. That figure was lower than the $51 billion analysts forecast and the $50 billion projected by management. Microsoft said third-party capacity delays affected the spending, and some of those funds will move into later quarters. Spending rose from $41 billion in the prior quarter and $34.9 billion a year earlier.

The company generated positive free cash flow and repurchased $2.9 billion in shares during the quarter. Chief Financial Officer Amy Hood said Microsoft "will access additional sources of funding when we believe it is attractive to do so."

On the earnings call, Chief Executive Satya Nadella said daily users of the Copilot tool increased 50% year over year. User satisfaction rose nearly 20% quarter over quarter to an all-time high, he said. Microsoft calls Copilot "the new OS [operating system] for work."

Looking ahead, Microsoft projects Azure revenue growth of about 49% to 50% in constant currency for the current quarter. That estimate sits above the 46% growth analysts forecast through FactSet. The company expects total revenue of $96 billion to $97.1 billion, compared with the Street's $95.6 billion estimate. Capital spending is planned at over $50 billion for the second quarter and $170 billion for the calendar year, down from the $175 billion previously expected.