Microsoft Corp expects to continue generating strong cash flow despite its massive investment in artificial intelligence, after reporting stronger-than-expected cloud growth and issuing an upbeat outlook that sent its shares more than 8% higher in after-hours trading.
The technology giant forecast fiscal first-quarter revenue of about US$90.4 billion, above analysts’ expectations of US$89.66 billion. It also projected Azure cloud revenue growth of 45% on a constant currency basis, ahead of market estimates of 40.92%.
For the quarter ended June 30, Azure revenue climbed 43%, surpassing analysts’ forecast of 39.98%, while total revenue rose 18% to US$90 billion. Earnings per share, excluding the impact of investments in OpenAI, came in at US$4.74, beating estimates of US$4.24.
Microsoft also revised the accounting treatment for long-term data centre leases, extending their useful life from 15 years to 25 years. The change lowered its reported capital expenditure forecast to US$50 billion for the first quarter of fiscal 2027, below analysts’ estimate of US$56.02 billion, although the company said its underlying investment plans remain unchanged.
Chief executive Satya Nadella said Microsoft was increasingly designing its own AI models and chips alongside using third-party technologies, allowing customers greater flexibility to choose AI tools based on cost and performance.
“That’s really the enterprise design architecture that we are going to evangelize. We ourselves are using it,” Nadella said.
Microsoft’s M365 Copilot paid seats exceeded 30 million during the quarter, up from 20 million previously and ahead of analysts’ expectations of 26.9 million. The company also reported a cloud contracted backlog of US$678 billion, reflecting continued demand for its AI and cloud services.
Reuters
