Microsoft Q1 2027 earnings: Azure and AI cloud demand drive profit beat

October 28, 2026

Microsoft's fiscal Q1 2027 profit topped estimates on faster Azure and AI-driven cloud growth, even as revenue came in just shy of forecasts.

Key takeaways

• Profit came in stronger than Wall Street expected while revenue landed just a touch below forecasts, a split that shows Microsoft’s AI and cloud investments are converting into bottom-line growth even as top-line growth, already fast, didn’t quite clear the bar analysts set.
• Azure, Microsoft’s cloud-computing business, grew roughly 48% year-over-year to about $33.2 billion — one of its fastest growth rates in years — as businesses keep renting Microsoft’s servers and AI tools rather than buying their own hardware.
• Total Microsoft Cloud revenue (Azure plus Microsoft 365, Dynamics and other cloud products) rose to roughly $63.9 billion with growth accelerating to about 30%, underscoring how central cloud and AI services have become to the company’s overall business.
• Commercial “backlog” — contracts already signed but not yet billed — jumped about 73% to roughly $677 billion, meaning customers have locked in a huge pipeline of future cloud and AI spending that should show up as revenue over coming years.
• Profit margins widened from a year ago, but a chunk of that improvement is an accounting change: Microsoft began spreading the cost of its data centers and office buildings over 25 years instead of 15, which lowers the depreciation expense booked each quarter and flatters reported profit, even though the company says its actual spending plans haven’t changed.
• Microsoft is still pouring money into AI infrastructure, guiding to spend more than $50 billion on capital projects this quarter alone, as it tries to keep up with demand for AI computing power that executives have said continues to outstrip available capacity.
• Finance chief Amy Hood called it a strong start to the fiscal year, pointing to accelerating cloud growth as evidence that heavy AI spending is beginning to pay off in the form of faster-growing, high-demand businesses.
• The results extend a run of double-digit growth across Microsoft’s cloud and AI products, including continued expansion of paid seats for its Copilot AI assistant, which the company has said is being adopted faster since moving to usage-based pricing.

Q1 2027 in context

Figures for the quarter ended Sep 2026 and the quarter ended Sep 2025, as reported to the SEC.

How the stock took it

Microsoft Corporation closed at $531.33 on Oct 27, 2026, the last session before the report, and at $530.14 on Oct 29, 2026, the first session after it — -0.2% across the report.

Closes from the market's daily record. Each figure spans the report date — from the last session that closed before it to the first that closed after — because a company may report before the open or after the close.

Fundamentals

Financial history →

Sources: company report · earnings call