Microsoft Fiscal Q1 2027: Azure Grows 48% as Commercial Bookings Backlog Hits $677 Billion

Microsoft opened its fiscal year with results that its finance chief said "exceeded expectations across revenue, operating income, and earnings per share," as Azure revenue grew 48% and the company's contracted backlog rose 73% to $677 billion.

Revenue for the fiscal first quarter ended Sept. 30 rose 19% to $92.3 billion, and operating income climbed 21% to $45.9 billion, according to the earnings release Microsoft filed with an 8-K on Wednesday. Net income rose 32% to $36.6 billion, or $4.92 a share.

Cloud growth speeds up

Microsoft Cloud revenue reached $63.9 billion, up 30%, or 31% in constant currency. "We delivered a strong start to the fiscal year with Microsoft Cloud revenue of $63.9 billion, with growth accelerating to 30%," CFO Amy Hood said in the release.

CEO Satya Nadella said the company is "helping organizations build and own their own intelligence" while "earning trust through agent safety and security."

Microsoft 365 commercial cloud revenue grew 17% on a reported basis, or 18% after adjusting for a one-point benefit in the prior year. Microsoft 365 consumer cloud revenue rose 17%, and industry solutions cloud revenue increased 10%.

OpenAI swing flatters the GAAP comparison

Part of the jump in reported profit came from Microsoft's stake in OpenAI. Investments in OpenAI added $207 million to net income this quarter, compared with a $3.1 billion hit a year earlier, the company said. Excluding that impact, non-GAAP net income rose 18% to $36.4 billion and non-GAAP EPS rose 18% to $4.89.

First look at the new segments

This was Microsoft's first quarter reporting under two new segments announced in September. Agents and Infra, which combines applications and agents, the company's multi-model system and Azure infrastructure, grew revenue 25% to $76.8 billion and earned $40.6 billion in operating income, up from $32.7 billion.

Devices and Consumer revenue fell 3% to $15.5 billion, though its operating income edged up to $5.4 billion from $5.2 billion. Windows OEM and devices revenue dropped 22%, and Xbox content and services fell 2%, while search and advertising revenue excluding traffic acquisition costs rose 12%.

In a separate 8-K filed the same day, Microsoft recast its financial statements for the three fiscal years ended June 30, 2026, to reflect the new segment structure. The company said the recast does not represent a restatement of previously issued financial statements.

Spending and shareholder returns

Additions to property and equipment roughly doubled to $39.4 billion from $19.4 billion a year earlier, according to the cash flow statement. Cash from operations rose to $58.0 billion from $45.1 billion.

Microsoft returned $10.2 billion to shareholders through dividends and share repurchases in the quarter. The company said it would provide forward-looking guidance on its earnings call rather than in the release.

Sources

1. Microsoft Form 8-K with fiscal first-quarter 2027 earnings release (Exhibit 99.1), filed Oct. 28, 2026 (accession 0001193125-26-436122)
2. Microsoft Form 8-K with recast segment financial information, filed Oct. 28, 2026 (accession 0001193125-26-436149)

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