Microsoft Posts Fastest Revenue Growth Since 2021 as Azure Surges 48% on AI Demand

Microsoft delivered a blowout fiscal first quarter, reporting revenue of $92.3 billion, up 19% year over year, its fastest growth rate since late 2021. Adjusted earnings per share came in at $4.89, topping analyst expectations and sending shares sharply higher on the day of the report, though the stock gave back some gains the following session.

Azure cloud revenue surged 48% to $33.17 billion, beating forecasts and prompting Microsoft to guide for even stronger growth of 49% to 50% in the December quarter. Microsoft Cloud revenue overall climbed 30% to $63.9 billion, while Microsoft 365 commercial cloud revenue grew 17%. The company's commercial backlog hit $677 billion, up 73% year over year, signaling sustained enterprise demand for cloud and AI infrastructure.

Microsoft spent $45.2 billion in capital expenditures during the quarter, a figure that drew scrutiny from some analysts weighing the return on AI infrastructure investment, though free cash flow still totaled $18.6 billion. Deepwater Asset Management's Gene Munster said the results show traditional software demand is holding up better than feared, noting that software growth is actually accelerating despite concerns that AI agents could eventually erode demand for knowledge-worker software. HyperFRAME Research analyst Stephanie Walter highlighted that Microsoft's AI revenue opportunity extends well beyond Azure itself, pointing to existing enterprise partnerships as a competitive moat.

Munster struck a cautious longer-term note, arguing that AI automation could eventually become a headwind for Microsoft's software business, but said the quarter validates the company's near-term position. Most analysts raised their price targets on the stock following the report, framing the results as confirmation of what they called an AI-led growth opportunity.