Microsoft Shares Rise 4% as Azure Growth Lifts Earnings

Microsoft shares gained 4% in extended trading Wednesday after the technology company reported quarterly earnings and revenue above analyst expectations, supported by strong demand for its Azure cloud infrastructure. For the quarter ended September 30, 2026, Microsoft recorded 19% year-over-year revenue growth as its artificial intelligence investments continued to drive infrastructure expansion.

Microsoft reported adjusted earnings of $4.89 per share, exceeding the $4.73 consensus estimate compiled by LSEG. Revenue reached $92.28 billion, surpassing analysts' forecast of $90.69 billion, according to the company's quarterly results.

Azure revenue reached $33.17 billion, exceeding StreetAccount analysts' estimate of $32.32 billion. Microsoft disclosed Azure's revenue in dollar terms for the first time, while its year-over-year growth rate accelerated from 42% in the June quarter to 48% in the September quarter.

Net income increased to $36.63 billion, or $4.92 per share, from $27.75 billion, or $3.72 per share, a year earlier. Adjusted earnings excluded an approximately $200 million impact from Microsoft's investment in OpenAI, according to the company's results.

Microsoft continued spending heavily on infrastructure to accommodate demand for artificial intelligence services. Capital expenditures and finance leases totaled $45.2 billion during the quarter, approximately 30% above the year-earlier level but below the $50.67 billion expected by analysts surveyed by StreetAccount.

Despite the spending increase, Microsoft generated $18.63 billion in free cash flow, down 27% from a year earlier. The decline came as other major cloud and technology companies also faced pressure on cash generation amid substantial infrastructure investments.

Alphabet reported more than $9 billion in negative free cash flow during its quarter, while Meta said the previous week that its cash flow had turned negative for the first time.

Microsoft also reorganized its reporting structure, replacing its previous three operating segments with two: Agents and Infra, and Devices and Consumer. The former structure had been in place for 11 years and divided the company's Azure, Office and Windows businesses across three segments.

The Agents and Infra segment generated $76.8 billion in revenue, an increase of nearly 25% from a year earlier. That figure exceeded the $75.63 billion consensus among analysts surveyed by StreetAccount. The segment includes Azure, Microsoft 365 cloud products, productivity and server licensing, industry solutions, and frontier and support services.

Revenue in the Devices and Consumer segment declined 3% to $15.48 billion, beating the $15.05 billion estimate from StreetAccount. The business includes search and advertising, Xbox, devices, and Windows operating system licenses sold to device manufacturers.

Sales of devices and Windows licenses fell 22% during the quarter. Microsoft attributed the decline to higher memory and storage costs, which pushed prices upward.

Microsoft also adjusted its workforce as it sought to balance investment in artificial intelligence infrastructure with capital efficiency. During the fiscal first quarter, the company said it would eliminate 4,800 jobs. On Monday, it announced voluntary buyouts for as many as 60,000 employees.

During the quarter, Microsoft established an artificial intelligence implementation unit and unveiled a Copilot AI super app with coding capabilities. The initiatives accompanied its broader effort to expand AI services while managing the financial demands of infrastructure development.

Microsoft shares had gained approximately 10% year to date through Wednesday's close, trailing the S&P 500 index, which had advanced 13% over the same period.