Microsoft (MSFT) FY2027 Q1 Earnings Call: Azure Growth Reaches 48%
Source Tradingkey
Key Takeaways
- Microsoft reported fiscal Q1 2027 revenue of $92.3 billion, up 19% year over year, while operating income increased 21% and operating margin reached 50%.
- Microsoft Cloud revenue rose 30% to $63.9 billion, led by 48% Azure growth. Management attributed the performance to Foundry, stronger CPU monetization and infrastructure efficiency gains.
- Microsoft Foundry revenue more than tripled year over year. The platform had over 120,000 customers, while revenue from open-source models on Foundry increased 10x.
- Capital expenditures totaled $45.2 billion, including $7.4 billion of finance leases. Free cash flow was $18.6 billion, reflecting increased infrastructure spending.
- Management expects fiscal Q2 revenue of $96.0 billion to $97.1 billion, representing growth of 18% to 19%. Azure revenue is projected to grow 49% to 50% in constant currency.
- AI demand continues to exceed available supply. Some third-party GPU capacity deliveries were delayed to the second half of fiscal 2027, and management expects Q2 capital expenditures to exceed $50 billion.
Key Financial Results
| Metric | Fiscal Q1 2027 result | Year-over-year change / commentary |
|---|---|---|
| Revenue | $92.3 billion | +19% |
| Gross margin | 68% | Gross margin dollars increased 17% |
| Operating income | — | +21%; +22% in constant currency |
| Operating margin | 50% | Increased slightly year over year |
| Earnings per share | $4.89 | +18%; +19% in constant currency when adjusted for the OpenAI investment impact |
| Microsoft Cloud revenue | $63.9 billion | +30%; +31% in constant currency |
| Microsoft Cloud gross margin | 66% | Declined due to a greater Azure revenue mix, partly offset by product-level improvements |
| Agents and Infra revenue | $76.8 billion | +25% |
| Devices and Consumer revenue | $15.5 billion | -3% |
| Operating cash flow | $58.0 billion | +29% |
| Capital expenditures | $45.2 billion | Approximately three-quarters related to short-lived assets, primarily CPUs and GPUs |
| Free cash flow | $18.6 billion | Reduced by higher capital expenditures |
| Shareholder returns | $10.2 billion | Dividends and share repurchases |
Business and Operating Performance
Azure, Foundry and AI infrastructure
Disclaimer: For information purposes only. Past performance is not indicative of future results.
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