Microsoft earnings for the quarter ended Sept. 30 show $92.3 billion in revenue, up 19%, and $36.6 billion in GAAP net income, up 32%, the company said in its fiscal 2027 first quarter release on Oct. 28. In the same quarter the company spent $39.4 billion on additions to property and equipment, more than it earned and roughly double the $19.4 billion of a year earlier. The case for that spending sits in the backlog: commercial remaining performance obligation, the value of contracted customer commitments not yet recognized as revenue, rose 73% to $677 billion, which is about 7.3 quarters of current revenue by a calculation from the two figures.
How Microsoft’s Segments Performed
Microsoft now reports two segments. Agents and Infra brought in $76.8 billion, up 25%. Devices and Consumer brought in $15.5 billion, down 3%. Microsoft Cloud revenue was $63.9 billion, up 30%, and Azure revenue rose 48% to $33.2 billion.
Within the cloud business, Microsoft 365 commercial cloud revenue rose 17% as reported and 18% on an adjusted basis, and Microsoft 365 consumer cloud revenue rose 17%. Industry solutions cloud revenue rose 10%.
On the other side of the ledger, Windows OEM and Devices revenue fell 22%, from $4.55 billion to $3.55 billion, a $1 billion drop. Xbox content and services revenue fell 2%, and search and advertising revenue excluding traffic acquisition costs rose 12%.
Where the Money Went
The $39.4 billion in equipment additions is the line to read against the earnings. It equals about 108% of GAAP net income, and it grew 103% from a year earlier while GAAP net income grew 32%, both calculations from the release’s figures. Microsoft also returned $10.2 billion to shareholders through dividends and share repurchases. Amy Hood, Microsoft’s executive vice president and chief financial officer, called the quarter “a strong start to the fiscal year.”
How OpenAI Changed the Net Income Comparison
GAAP net income rose 32% while non-GAAP net income, which excludes the impact of investments in OpenAI, rose 18% to $36.4 billion. The gap is OpenAI. Net gains from the investments added $207 million to net income and $0.03 to diluted earnings per share this quarter, and net losses a year earlier reduced net income by $3.1 billion and EPS by $0.41. That is a swing of about $3.3 billion in net income between the two quarters, a calculation from the two figures. Diluted EPS was $4.92 on a GAAP basis and $4.89 non-GAAP. Operating income was $45.9 billion, up 21%.
