According to Zhitong Finance APP, Microsoft (MSFT.US) announced its first-quarter financial results for fiscal year 2027 on Wednesday. The data showed that the company’s revenue for the quarter reached $92.279 billion, a 19% year-over-year increase; GAAP net income was $36.629 billion, up 32% from $27.747 billion in the same period last year; and GAAP diluted earnings per share were $4.92, compared to $3.72 in the same period last year, representing a 32% year-over-year increase.
Non-GAAP adjusted net income reached $36.422 billion, a 18% year-over-year increase; adjusted earnings per share were $4.89, up from $4.13 in the same period last year, representing an 18% increase. Microsoft stated that its non-GAAP results exclude the impact of its investment in OpenAI.
In terms of profitability, Microsoft's operating profit for the first fiscal quarter reached $45.915 billion, a 21% year-over-year increase, or a 22% increase at constant exchange rates; the operating margin was approximately 49.8%, up from 48.9% in the same period last year. The gross profit for the quarter was $62.559 billion, representing a year-over-year increase of approximately 17%, with a gross margin of about 67.8%.
Microsoft CFO Amy Hood stated that the company had a strong start to the new fiscal year, with Microsoft Cloud revenue reaching $63.9 billion, a 30% year-over-year increase, or 31% growth at constant exchange rates, with acceleration continuing. The company’s quarterly revenue, operating profit, and earnings per share all exceeded internal expectations.
Azure revenue grew 48%, with cloud services continuing to benefit from AI demand.
Cloud computing continues to be a major driver of Microsoft’s revenue growth. In the first fiscal quarter, Microsoft Azure revenue reached $33.165 billion, a 48% increase from $22.384 billion in the same period last year, reflecting sustained growth in enterprise demand for cloud computing and artificial intelligence infrastructure.
Microsoft’s cloud business generated total revenue of $63.9 billion, a 30% year-over-year increase, or 31% growth at constant exchange rates. Meanwhile, Microsoft’s commercial backlog reached $677 billion, up 73% year-over-year, indicating continued growth in the scale of commercial contracts signed but not yet recognized as revenue.
Microsoft 365 commercial cloud revenue increased 17% year-over-year, or 18% at constant exchange rates. Adjusting for a one-percentage-point impact from revenue recognition in the prior-year period, commercial cloud revenue grew 18% year-over-year, or 19% at constant exchange rates. Microsoft 365 consumer cloud revenue increased 17% year-over-year, and industry solutions cloud revenue increased 10% year-over-year.
Microsoft Chairman and CEO Satya Nadella said the company is empowering customers with stronger capabilities, more choices, greater control, and more cost-effective solutions through a comprehensive technology ecosystem.
Nadella noted that Microsoft is driving broader adoption of innovative technologies across industries and converting them into tangible business outcomes by helping enterprises build and master their own intelligent capabilities while enhancing the security and reliability of AI agents.
Under the new business architecture, revenue from Agents and Infra increased by 25%.
Notably, starting in fiscal year 2027, Microsoft reorganized its business segments into two main categories: Agents and Infra (Agents and Infrastructure) and Devices and Consumer (Devices and Consumer).
Among these, the Agents and Infra segment generated $76.795 billion in revenue for the first fiscal quarter, a 25% year-over-year increase; operating profit reached $40.558 billion, up approximately 24% from $32.718 billion in the same period last year. This segment, which includes Azure, Microsoft 365 cloud services, and productivity and server licensing, is Microsoft’s primary source of revenue and profit.
In comparison, the Devices and Consumer segment reported first-quarter revenue of $15.484 billion, a 3% year-over-year decline, and an operating profit of $5.357 billion, an approximate 2% year-over-year increase. Specifically, search and advertising revenue, excluding traffic acquisition costs, increased by 12% year over year; revenue from Xbox content and services decreased by 2% year over year, or 1% at constant exchange rates.
Windows OEM and device business performance remained relatively weak, with revenue declining 22% year-over-year. By product and service revenue, Microsoft's Azure revenue for the first fiscal quarter was $33.165 billion, Microsoft 365 cloud revenue was $27.778 billion, productivity and server licensing revenue was $8.407 billion, search and advertising revenue was $6.554 billion, and Xbox revenue was $5.379 billion.
OpenAI's investment gains impact GAAP profit performance
Notably, Microsoft's GAAP net income growth this quarter significantly outpaced its non-GAAP net income growth, primarily due to the accounting impact of its investment in OpenAI. Microsoft disclosed that, in the first quarter of fiscal year 2027, net gains from its investment in OpenAI increased the company's GAAP net income by $207 million, equivalent to an increase of $0.03 in diluted earnings per share.
In comparison, the net loss from the investment in OpenAI during the same period last year reduced the company’s net income by approximately $3.1 billion and earnings per share by $0.41. Therefore, excluding the impact of the OpenAI investment, Microsoft’s adjusted net income for the first fiscal quarter increased by 18% year-over-year, and adjusted earnings per share increased by 18%, below the 32% growth under GAAP.
Capital expenditures doubled year-over-year, and operating cash flow increased by 29%.
In terms of cash flow, Microsoft generated $58 billion in operating cash flow for its first fiscal quarter, representing a 29% increase compared to $45.057 billion in the same period last year. Meanwhile, the company continued to increase its infrastructure investments, with capital expenditures on property and equipment reaching $39.367 billion for the quarter—a 103% increase from $19.394 billion in the same period last year.
On a free cash flow basis, calculated as cash flow from operating activities minus expenditures on property and equipment, Microsoft's first fiscal quarter free cash flow was approximately $18.633 billion, lower than $25.663 billion in the same period last year.
On the balance sheet, as of September 30, 2026, Microsoft held a total of $64.509 billion in cash, cash equivalents, and short-term investments, down from $76.843 billion at the end of June 2026. During its first fiscal quarter, Microsoft returned $10.2 billion to shareholders through stock repurchases and dividends. Of this amount, approximately $4.379 billion was spent on stock repurchases, and approximately $6.757 billion was paid in cash dividends.