TLDR
- Microsoft (MSFT) stock was up 3% premarket Thursday at $548.19 after a Q1 earnings and revenue beat.
- Adjusted EPS was $4.89 on $92.3 billion in revenue, versus estimates of about $4.71 and $90.6 billion.
- Azure revenue grew 48%, ahead of the 44.3% expected, and management guided to 49% growth next quarter.
- Capex was $45.2 billion, below the $51 billion analysts expected, and chip stocks fell in late trading.
- Free cash flow was $18.6 billion, well above the $7.99 billion Wall Street expected.
Microsoft (MSFT) stock rose 3.2% to $548.19 in premarket trading Thursday after the company beat earnings estimates. It closed Wednesday at $531.01 and had gained 4.3% in after-hours trading.
Fiscal first-quarter adjusted earnings came in at $4.89 per share on revenue of $92.3 billion. Analysts had expected about $4.71 per share on $90.6 billion in revenue.
Azure did the heavy lifting again. Revenue from the cloud unit grew 48%, ahead of the 44.3% analysts expected.
Microsoft Cloud revenue rose 31% in constant currency to $63.9 billion. Azure also passed $100 billion in annual revenue during fiscal 2026.
Investors have been watching cloud results closely to see if AI spending is paying off. Ryan Lee of Direxion said the Azure beat shows Microsoftās AI monetization efforts have progressed well.
Capex comes in light
Capital expenditures were $45.2 billion, up from $34.9 billion a year ago. Analysts had expected $51 billion.
The lighter spending helped the earnings beat. Chip stocks fell in late trading Wednesday.
Free cash flow was $18.6 billion, down from $25.7 billion a year earlier. It still topped the $7.99 billion Wall Street expected.
Alphabet (GOOGL) reported negative free cash flow on Wednesday night. Microsoftās number held up well by comparison.
Last quarter, Microsoft was the only major hyperscaler that did not raise its capex forecast. Meta, Alphabet, Amazon and Oracle are the others.
Guidance and weak spots
CFO Amy Hood said second-quarter capex should top $50 billion, in line with estimates. She expects spending to pick up in the second half, mainly on CPUs and GPUs, along with higher memory and storage costs.
Hood also guided to Azure growth of 49% next quarter. Analysts had been looking for 44.6%.
Not everything was rosy. The devices and consumer segment fell 3%, dragged down by Xbox, Windows and devices. Higher memory prices have pushed up PC costs and cut into demand.
Earlier this week, Microsoft offered voluntary exit packages to 60,000 employees. It expects only a fraction to accept as it works to bring down costs.
Steve Sosnick of Interactive Brokers said there is ācertainly enough here for investors to be encouraged.ā Microsoft stock closed Wednesday down 0.06% and was trading $17.18 higher premarket Thursday.
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