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Microsoft Put a Number on Azure: $33.2 Billion, Up 48%
Microsoft disclosed Azure's revenue in dollars for the first time on Wednesday: $33.17 billion, up 48% and above forecasts. Total revenue rose 19% to $92.28 billion, and the shares rose 3% to 5% after hours as free cash flow held at $18.6 billion.
For years investors had to estimate the size of Azure from a growth rate. On Wednesday, October 28, Microsoft gave them the number. Azure revenue was $33.17 billion in the fiscal first quarter, up 48% from a year earlier and above the $32.32 billion analysts expected, according to SiliconANGLE. Revenue for the whole company rose 19% to $92.28 billion against forecasts of $90.69 billion, adjusted earnings were $4.89 a share against $4.73, and net income rose to $36.63 billion from $27.75 billion.
The report also used a new structure. Microsoft now has two segments: Agents and Infra, which includes Azure, with revenue of $76.8 billion, up 25%, and Devices and Consumer, with $15.48 billion, down 3%. Sales of devices and Windows licences fell 22%, which chief executive Satya Nadella attributed to higher memory and storage costs, the same shortage that is lifting chipmakers' profits. Users of Microsoft 365 Copilot rose 50% from the previous quarter, although the company did not disclose how many pay for it.
Spending kept rising, but by less than some feared. Capital expenditure including finance leases was $45.2 billion, up about 30% and below a projected high of $50.67 billion, and about 75% of it went to short-lived assets such as chips and servers, up from 66%. Free cash flow fell 27% to $18.63 billion but stayed positive by a wide margin. "We still have demand that exceeds supply," said chief financial officer Amy Hood, who added that Microsoft has access to debt markets but has not yet tapped them.
The guidance did the rest. Microsoft expects revenue of $96 billion to $97.1 billion in the December quarter, above the $95.6 billion consensus, and Azure growth of 49% to 50% in constant currency against about 45% expected. The shares, which closed at $531.01, rose between about 3% and 5% after hours, on the same evening that Alphabet fell about 9% on negative free cash flow.
The share of short-lived assets is the number to keep an eye on. Servers and accelerators lose most of their economic value within a few years, so a capital budget weighted towards them turns quickly into depreciation and has to be renewed. A 48% growth rate makes that affordable today; the question for 2027 is whether Azure keeps growing faster than its depreciation bill once the current shortage of computing capacity eases.