Microsoft on October 28, 2026, announced results for its fiscal 2027 first quarter, ended September 30, 2026, reporting revenue of $92.3 billion, up 19% year over year, and net income of $36.6 billion, up 32% on a GAAP basis. Azure revenue increased 48%.
Operating income was $45.9 billion and increased 21%, or 22% in constant currency. Diluted earnings per share was $4.92, up 32% on a GAAP basis. On a non-GAAP basis, which excludes the impact from investments in OpenAI, net income was $36.4 billion, up 18%, and diluted earnings per share was $4.89, also up 18%. Microsoft presents constant-currency figures to show underlying performance excluding the effect of foreign currency rate fluctuations, according to the release.
“We are delivering greater capability, choice, control, and cost efficiency for customers across our entire stack,” Satya Nadella, Microsoft’s chairman and chief executive officer, said in the company’s announcement. Nadella said the company is helping organizations build and own their own intelligence while earning trust through agent safety and security.
Amy Hood, Microsoft’s executive vice president and chief financial officer, said Microsoft Cloud revenue was $63.9 billion, with growth accelerating to 30% year over year, or 31% in constant currency. Hood said results exceeded expectations across revenue, operating income, and earnings per share.
Segment Results and Cloud Metrics
Revenue in the Agents and Infra segment was $76.8 billion and increased 25%, while revenue in the Devices and Consumer segment was $15.5 billion, down 3%. Commercial remaining performance obligation increased 73% to $677 billion.
Across product and service lines, Microsoft 365 commercial cloud revenue increased 17% on a reported basis and 18% on an adjusted basis, with the adjusted figure normalized for a one-point benefit from in-period revenue recognition in the prior year, according to the release. Microsoft 365 consumer cloud revenue increased 17%, industry solutions cloud revenue increased 10%, and search and advertising revenue excluding traffic acquisition costs increased 12%. Xbox content and services revenue decreased 2%, and Windows OEM and devices revenue decreased 22%.
The release’s revenue table shows Azure at $33.2 billion for the quarter, up from $22.4 billion in the year-ago period. Microsoft 365 cloud revenue was $27.8 billion, search and advertising revenue was $6.6 billion, Xbox revenue was $5.4 billion, and Windows OEM and devices revenue was $3.6 billion.
The two-segment structure is new for fiscal 2027. Microsoft announced changes to its segment reporting in September 2026, creating the Agents and Infra segment, which brings together its applications and agents, its multi-model system, and Azure infrastructure, and the Devices and Consumer segment, which comprises its key consumer offerings. Prior-period amounts have been recast to conform to the new structure.
OpenAI Relationship and Investment Disclosures
Microsoft’s quarterly report on Form 10-Q discloses $10.0 billion of revenue from commercial arrangements with OpenAI, inclusive of revenue-sharing payments, for the three months ended September 30, 2026. Accounts receivable from OpenAI were $7.2 billion as of September 30, 2026, compared with $6.0 billion as of June 30, 2026.
The filing states that Microsoft has made total funding commitments of $13.0 billion related to its OpenAI investment, of which $12.0 billion had been funded as of September 30, 2026. The investment is accounted for under the equity method and represents an approximate 24% interest in OpenAI on an as-converted basis. Microsoft calculates its equity-method income or loss using the hypothetical liquidation at book value method because its liquidation rights and priorities differ from its underlying ownership interest, according to the filing.
Other income in the quarter included $272 million of net gains from investments in OpenAI, against $4.1 billion of net losses in the year-ago quarter, the filing states. The earnings release’s non-GAAP reconciliation removes those effects: net gains increased net income and diluted earnings per share by $207 million and $0.03 in the latest quarter, while net losses reduced them by $3.1 billion and $0.41 in the prior-year quarter.
Cash Flow, Capital Spending, and Shareholder Returns
Net cash from operations was $58.0 billion for the quarter. Additions to property and equipment were $39.4 billion, compared with $19.4 billion in the year-ago quarter, according to the company’s cash flow statement.
Microsoft returned $10.2 billion to shareholders in the form of dividends and share repurchases during the quarter, and the 10-Q shows cash dividends declared of $0.98 per common share. Cash, cash equivalents, and short-term investments totaled $64.5 billion as of September 30, 2026, and total assets were $779.4 billion. The filing reports 7,426,194,552 shares of common stock outstanding as of October 22, 2026.
Nadella, Hood, chief accounting officer Alice Jolla, deputy general counsel and corporate secretary Brian DeFoe, and investor relations vice president Jonathan Neilson were set to host a conference call and webcast at 2:30 p.m. Pacific time (5:30 p.m. Eastern time) on October 28, 2026, to discuss the quarter’s performance and certain forward-looking information. Microsoft said it would provide forward-looking guidance on the call, and that the webcast will be available for replay through the close of business on October 28, 2027.
