Microsoft’s cloud business is giving investors something rare in this AI cycle: growth that comes with spare cash. After the company’s fiscal first quarter ended in September, its shares rose more than 5 per cent in after-hours trading, helped by a forecast that beat expectations.
Azure revenue reached $33.17 billion, slightly above analysts’ $32.84 billion estimate, and the cloud unit grew 48 per cent. Total revenue climbed about a fifth to $92.28 billion, and adjusted profit came to $4.89 a share against a $4.73 consensus. Looking ahead, Microsoft guided Azure growth of 49 to 50 per cent for the next quarter, plus overall sales of $96 billion to $97.1 billion. Both figures sit above Wall Street’s averages.
The more telling number sits below the revenue line. Microsoft produced $18.6 billion in free cash flow, roughly $10 billion more than analysts expected, because capital spending landed under its own plan. It spent $45.2 billion on data centers and equipment, against a $50 billion projection.
Investor relations chief Jonathan Neilson blamed late deliveries of third-party capacity, not a change of course. That distinction matters, since Microsoft has only spent $118.1 billion so far this calendar year. Hitting its $175 billion forecast would require $56.9 billion in the final three months.
Rivals tell a different story. Alphabet posted negative free cash flow of $9.07 billion as spending surged, and its shares fell 8 per cent in extended trading even though cloud sales doubled. Meanwhile, Oracle said spending should peak this fiscal year and next, and it promised no more than $20 billion in extra AI financing through fiscal 2030. Big Tech overall is expected to pour more than $700 billion into AI buildouts this year, so lenders and shareholders are watching debt closely.
CEO Satya Nadella offered a notable view of demand. He said the “shiny-object stuff is waning,” and that wide groups of customers now plan AI spending over a decade, rather than a few giant buyers ordering quarter by quarter. He wants breadth, he added.
