Microsoft 1Q earnings beat forecasts, shares fall on capex surge
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The news: Microsoft posted stronger-than-expected earnings and cloud growth in the September quarter, but shares fell after it disclosed a steep rise in capital spending that seemed to unsettle investors.
The numbers: Revenue rose 18%, driven by a 40% jump in its Azure cloud services. Net income reached USD27.7 billion and earnings per share at USD3.72, exceeding consensus estimates compiled by Bloomberg.
The company’s total capital expenditure, including leases, rose to USD34.9 billion from USD24 billion in the previous quarter, as it continues investing heavily to meet growing demand for cloud and AI services.
Shares fell about 3% in after hours trading after the result.
What they said: “Our planet-scale cloud and AI factory, together with Copilots across high value domains, is driving broad diffusion and real-world impact," CEO Satya Nadella said in a statement. “It’s why we continue to increase our investments in AI across both capital and talent to meet the massive opportunity ahead.”
The context: Microsoft has been investing heavily in data centres and GPUs, with major deals in the US and Europe. It also revised its agreement with OpenAI, gaining a 27% stake in the new public-benefit entity and exclusive access to its technology until 2032.
OpenAI, in turn, has committed to buying hundreds of billions worth of cloud services from Microsoft.
The result came as Microsoft confirmed its Azure and 365 services were experiencing outages ahead of the earnings release and that it was investigating the issues.
The sources: Microsoft, The Wall Street Journal, Bloomberg
