Microsoft Earnings: Azure Grew 48%, Beating Microsoft’s Own Forecast Again
Azure, Microsoft’s cloud, grew 48% in constant currency from July to September, beating Microsoft’s own forecast of 44% to 45% for at least the fifth quarter running by our count. In fiscal 2027’s first quarter, capex was $45.2 billion, Microsoft’s spending on data centers and equipment with leased sites booked like purchases, below an outlook of over $50 billion.
The short answer. Azure grew faster than Microsoft itself had forecast, for at least the fifth quarter running by our count. Capex was $45.2 billion, counting data center sites leased on terms booked like a purchase, below the over $50 billion Microsoft forecast. That forecast already allowed for more new leases being booked as rent. Azure rents out computing for AI and other work, so its growth indicates how much businesses want cloud computing, AI included.
Microsoft fiscal first quarter 2027, July to September 2026
On this page
- Microsoft earnings report: Azure growth against the forecast
- Microsoft’s backlog: how much revenue is already under contract?
- How much is Microsoft spending on AI data centers?
- Did Microsoft beat earnings?
- Microsoft’s new segments: Agents and Infra, Devices and Consumer
- Microsoft dividend, buybacks and debt
- What Microsoft’s earnings say about Azure and AI spending
- Frequently asked questions
Microsoft earnings report: Azure growth against the forecast
Azure, the service businesses rent for computing and AI, grew 48% in constant currency. That beats Microsoft’s own forecast, as Azure has in every quarter of the past year.
Microsoft gives one Azure forecast a quarter, on its results call, and states it in constant currency, which leaves out the effect of exchange rates. On July 29 chief financial officer Amy Hood said: “In Azure, we expect revenue growth of approximately 45% in constant currency.”
On September 2 Microsoft narrowed what Azure covers, moving GitHub’s cloud services and Security Copilot into Microsoft 365 and its healthcare cloud into a new Industry solutions line. It restated the forecast for the narrower Azure as “Growth of 44% to 45% in constant currency,” the like-for-like benchmark for this quarter.
The release puts Azure’s revenue at $33.2 billion, up 48% as reported and 48% in constant currency. It is the first results release to give Azure in dollars, after the September restatement put the same three months of 2025 at $22.4 billion.
By our count, Azure finished above the forecast Microsoft gave three months before in each of the five quarters to September 2026. In the four quarters to June 2026 each result landed at least a point above the top of the range. This quarter’s gap of 3 points over the top of the range ties the widest of those five quarters. That was April to June 2026, when Azure grew 43% against a forecast of 39% to 40%.
Show the data
| Item | Microsoft forecast (top) | Azure growth | Change |
|---|---|---|---|
| Jul to Sep 2025 | 37% | 39% | +2 pts |
| Oct to Dec 2025 | 37% | 38% | +1 pts |
| Jan to Mar 2026 | 38% | 39% | +1 pts |
| Apr to Jun 2026 | 40% | 43% | +3 pts |
| Jul to Sep 2026, narrower Azure | 45% | 48% | +3 pts |
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| Quarter (Microsoft fiscal) | Azure forecast, constant currency | Azure growth, constant currency |
|---|---|---|
| July to September 2025 (Q1 FY26) | Approximately 37% | 39% |
| October to December 2025 (Q2 FY26) | Approximately 37% | 38% |
| January to March 2026 (Q3 FY26) | 37% to 38% | 39% |
| April to June 2026 (Q4 FY26) | 39% to 40% | 43% |
| July to September 2026 (Q1 FY27), narrower Azure | 44% to 45% | 48% |
Source: forecasts from the outlook on the previous quarter’s results call, the last as restated on September 2, 2026; each result from Microsoft’s results release (Microsoft Investor Relations). Rows before July 2026 use the Azure definition of their time.
Hood also said in July that “customer demand continues to exceed supply.” In our reading, with demand above supply, Azure’s growth depends on the capacity Microsoft has built and switched on. That is why the spending figure in this release matters as much as the growth rate.
Microsoft’s backlog: how much revenue is already under contract?
Microsoft’s commercial remaining performance obligation, the revenue business customers have signed for that Microsoft has still to deliver, was $677 billion on September 30. That is 73% more than a year earlier, though about level with June 30, according to Microsoft’s results releases for the September and June quarters.
This is the backlog Microsoft reports for its business customers. Its quarterly report, filed with the SEC on October 28, says Microsoft expects about 30% of it to turn into revenue within 12 months, and the rest later.
The 73% rise compares with the end of September 2025. Against the end of June, when the June quarter release put it at $678 billion, the commercial backlog was about level. The total for all customers, which Microsoft calls remaining performance obligations, was also flat. Its annual report put it at $684 billion on June 30, and its quarterly report at $683 billion on September 30. In July Hood had warned that “the significant OpenAI contracts signed in the prior year will result in some quarterly volatility in both the bookings and RPO growth rates.”
The release does not say how much of the September total comes from OpenAI. For April to June, Microsoft said in July that the backlog grew 25% from a year earlier when OpenAI is excluded. It added that all of the increase from March to June came from customers other than frontier model companies, the AI labs such as OpenAI.
How much is Microsoft spending on AI data centers?
Microsoft’s capex was $45.2 billion in the three months to September, counting leased data center sites booked like purchases, below its outlook of over $50 billion. That outlook already counted the lease change explained below.
Capital expenditures, or capex, is what a company spends on buildings and equipment that last more than a year, and Microsoft’s figure includes assets acquired under finance leases. Cash paid for property and equipment was $39.4 billion, a separate measure that differs from capex in when goods are paid for and in leaving out finance leases. By our calculation, capex was 49% of revenue in the quarter, against 45% a year earlier, when more new leases were counted in capex.
Show the data
| Category | Value |
|---|---|
| Apr to Jun '25 | $24.2B |
| Jul to Sep '25 | $34.9B |
| Oct to Dec '25 | $37.5B |
| Jan to Mar '26 | $31.9B |
| Apr to Jun '26 | $41.0B |
| Jul to Sep '26 | $45.2B |
Capex was 30% higher than a year earlier, though the two quarters count leases differently, and up from the $41.0 billion of April to June. Since July, Microsoft treats its data center buildings as lasting 25 years instead of 15, and Hood said on July 29 that “more of our future datacenter leases will shift from finance leases to operating leases as a result of this update. Finance leases are included in capital expenditures while operating leases are not.”
A finance lease is booked as if Microsoft had bought the site, while an operating lease is booked as rent. So the building goes on while less of it shows up as capex. Azure beat its forecast in a quarter when capex fell short of the outlook, and the release gives no reason for the gap. Microsoft’s slides say roughly three-quarters of capex went to short-lived assets, primarily CPUs and GPUs, after about two-thirds in April to June.
| Until June 2026 | From July 2026 | |
|---|---|---|
| Life of a data center building | 15 years | 25 years |
| How more new leases are booked | Finance leases, like a purchase | Operating leases, like rent |
| In Microsoft’s capex figure | Finance leases are included | Operating leases are not included |
Hood put a number on it for calendar 2026. In April Microsoft expected “roughly $190 billion in capital expenditures.” In July she said the plan was otherwise unchanged and that “the shift from finance to operating leases adjusts our expectation to approximately $175 billion.” By our subtraction, the lease change alone takes about $15 billion of 2026 building out of the capex line.
Microsoft’s quarterly report shows the shift in the first quarter under the new treatment. New operating leases, the kind booked as rent, brought in $6.5 billion of leased assets, against $1.4 billion a year earlier, while new finance leases fell.
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| Leased assets Microsoft took on, by kind of lease | July to September 2026 | July to September 2025 |
|---|---|---|
| Operating leases, booked like rent | $6.5 billion | $1.4 billion |
| Finance leases, booked like a purchase | $5.2 billion | $9.1 billion |
Source: Microsoft Form 10-Q for the quarter ended September 30, 2026, leases note, right-of-use assets obtained in exchange for lease obligations. This measure differs from the $7.4 billion of finance leases in Microsoft’s capex slides.
The same report lists $364.6 billion of further leases, mostly for data centers, signed but not yet started, some of them still subject to conditions. At the end of June, Microsoft’s annual report put it at $329.1 billion. Under the change Hood described in July, more of those leases will be booked as operating leases and so stay out of capex.
If Microsoft keeps its figure of approximately $175 billion, the three months to December would carry about $57 billion of capex by our calculation. That remainder holds only while the July figure stands. Some of the rise is price. In April, Microsoft said its 2026 spending included “approximately $25 billion from the impact of higher component pricing,” such as the memory chips whose cost SK hynix’s results showed climbing from the seller’s side.
Did Microsoft beat earnings?
Revenue was $92.3 billion, above the top of the range Microsoft forecast in July. Its July outlook gave revenue and cost ranges, and no earnings per share figure.
Revenue rose 19% from a year earlier and operating income, the profit from running the business before interest, investments and taxes, rose 21% to $45.9 billion.
Diluted earnings per share were $4.92 under GAAP, the standard accounting rules, and $4.89 on Microsoft’s non-GAAP basis, which leaves out the gains and losses from its investment in OpenAI.
In July Microsoft had forecast revenue of $89.85 billion to $90.95 billion, growth of 16% to 17%, with faster growth from business customers partly offset by weaker demand for PCs.
In after-hours trading Microsoft shares were at $552.55 at 4:14 p.m. ET, up 4.1% from the regular-session close of $531.01, according to StockTitan real-time Nasdaq data.
Microsoft’s new segments: Agents and Infra, Devices and Consumer
Agents and Infra, home of Azure and Microsoft 365, brought in $76.8 billion, above Microsoft’s forecast. Devices and Consumer brought in $15.5 billion, above its forecast.
Agents and Infra holds Azure, Microsoft 365 for businesses and consumers, industry clouds, server software and consulting, while Devices and Consumer holds Windows, Xbox and advertising. Microsoft Cloud, the cloud products from Azure to the online Office apps, brought in $63.9 billion, up 30%.
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| Segment | Revenue | Change from a year earlier | Microsoft’s forecast, as restated September 2 |
|---|---|---|---|
| Agents and Infra (Azure, Microsoft 365, server software, industry clouds) | $76.8 billion | 25% | $75.15 billion to $75.75 billion |
| Devices and Consumer (Windows, Xbox, search and advertising) | $15.5 billion | minus 3% | $14.7 billion to $15.2 billion |
| Total | $92.3 billion | 19% | $89.85 billion to $90.95 billion |
Source: Microsoft results release, quarter ended September 30, 2026; forecasts from Microsoft’s September 2, 2026 presentation on Form 8-K (Microsoft Investor Relations, SEC).
Microsoft dividend, buybacks and debt
Microsoft returned $10.2 billion to shareholders through dividends and share buybacks in the quarter, and its board raised the quarterly dividend by 8% in September.
Microsoft’s slides split it into $7.3 billion of dividends and $2.9 billion of share repurchases. Diluted shares, the count that includes shares owed under employee stock awards, averaged 7.45 billion, against 7.47 billion a year earlier.
The next quarterly dividend is $0.98 a share, up from $0.91, as Microsoft announced on September 15. Its quarterly report lists it as payable on December 10, 2026 to shareholders of record on November 19.
The balance sheet shows long-term debt of $31.1 billion and $4.4 billion due within a year, against $64.5 billion of cash and short-term investments, more than its total debt.
Cash from the business covered both the building and the payouts. Cash from operations was $58.0 billion in the quarter, and $18.6 billion was left after paying for property and equipment, which Microsoft’s slides call free cash flow.
What Microsoft’s earnings say about Azure and AI spending
Azure again grew faster than Microsoft forecast, while capex came in below the outlook. More new data center leases are now booked as rent, outside that capex figure.
The three months to December would carry the rest of Microsoft’s 2026 capex figure, so its next report shows whether that figure holds.
What to watch
- Whether Azure growth speeds up in the six months to December, as Microsoft said in July it expected: its fiscal second quarter release, expected in late January 2027.
- Whether capex for October to December fits Microsoft’s calendar 2026 figure of approximately $175 billion: the same fiscal second quarter release and its financial summary slides.
Our numbers
- Five beats in five quarters: the Azure forecast Microsoft gave on each results call against the constant currency growth in the next release, five quarters.
- 49% of revenue: capex including finance leases divided by revenue for the quarter, both as Microsoft reports them.
- About $15 billion: Microsoft’s calendar 2026 capex expectation of roughly $190 billion in April less approximately $175 billion in July, which Microsoft tied to the lease shift.
- About $57 billion for October to December: approximately $175 billion less capex of $31.9 billion, $41.0 billion and $45.2 billion in the three quarters from January to September 2026.
Frequently asked questions
What time is the Microsoft earnings call?
Microsoft’s call starts at 2:30 p.m. Pacific Time, 5:30 p.m. Eastern, on October 28, 2026, with a live webcast on Microsoft’s investor relations site. The results release came out after the market closed, before the call.
What does Microsoft forecast for the December quarter?
Microsoft gives its forecast for the next quarter on the results call and in outlook slides it posts on its investor relations site during the call, not in the release. In July it said it expected Azure growth to keep accelerating through the six months to December and calendar 2026 capex of approximately $175 billion. The October 28 call may update that outlook.
How much revenue does Azure make?
Azure brought in $33.2 billion in the three months to September 2026, according to Microsoft’s results release, up 48% from a year earlier. On the narrower definition Microsoft adopted in September, Azure made $101.9 billion in the fiscal year to June 2026.
How much will Microsoft spend on data centers in 2026?
In July Microsoft said it expected approximately $175 billion of capital expenditures, its spending on cloud and AI infrastructure and other long-lived assets, in calendar 2026. That is down from roughly $190 billion in April, which Microsoft tied to more data center leases now counting as operating leases. Its capex of $31.9 billion, $41.0 billion and $45.2 billion in the three quarters to September leaves about $57 billion of that figure for October to December, by our calculation.
Does Microsoft pay dividends?
Yes. Microsoft pays a quarterly dividend of $0.98 a share, payable on December 10, 2026 to shareholders of record on November 19, after an 8% increase announced on September 15, 2026.
Sources
- Microsoft (MSFT) overview on StockTitan
- Microsoft (MSFT) financials on StockTitan
- Microsoft announces quarterly earnings release date, October 7, 2026
- Microsoft announces quarterly dividend increase, September 15, 2026
- SK hynix earnings: the memory maker’s operating margin now tops Nvidia’s
- Microsoft results release, quarter ended September 30, 2026 (Microsoft Investor Relations)
- Microsoft financial summary slides, quarter ended September 30, 2026
- Microsoft FY27 Segments and Investor Metrics, September 2, 2026 (Form 8-K, Exhibit 99.1)
- Microsoft quarterly report on Form 10-Q, quarter ended September 30, 2026 (SEC)
- Microsoft annual report on Form 10-K, fiscal year ended June 30, 2026 (SEC)
- Microsoft fiscal fourth quarter 2026 earnings call, July 29, 2026
- Microsoft fiscal third quarter 2026 earnings call, April 29, 2026
- Microsoft fiscal second quarter 2026 earnings call, January 28, 2026
- Microsoft fiscal first quarter 2026 earnings call, October 29, 2025
- Microsoft fiscal fourth quarter 2025 earnings call, July 30, 2025
- Microsoft fiscal fourth quarter 2026 results release
- Microsoft fiscal fourth quarter 2026 financial summary slides
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