Microsoft (MS) shares rebound in after-hours trading on surprise earnings; Azure revenue, disclosed for the first time, beats expectations

[Financial News]  

Microsoft (MS) rebounded in after-hours trading after reporting better-than-expected quarterly results on the 28th (local time).
MS closed regular trading slightly lower, down $0.32 (0.06%) at $531.01, then jumped $19.96 (3.76%) from the regular-session closing price to $550.97 in after-hours trading.
That contrasted with Alphabet Inc., whose shares plunged more than 8% in after-hours trading on weak quarterly results.
Revenue from Microsoft Azure, its cloud service, surged 48%, helping results top expectations. That exceeded the 42% revenue growth in the previous quarter. MS is competing fiercely in the cloud market with other hyperscalers, including Amazon.com, Inc., Alphabet Inc., Oracle and Meta Platforms.  
In its earnings report after the market close that day, MS said it recorded revenue of $92.28 billion and adjusted earnings per share (EPS) of $4.89 in the first quarter of fiscal 2027, which ended on September 30.
According to CNBC, Wall Street analysts surveyed by LSEG had expected revenue of $90.69 billion and EPS of $4.73.
Total revenue rose 19% year over year, while Microsoft Azure revenue surged 48% over the same period.
MS, too, faced heightened concerns as it invested heavily in artificial intelligence (AI), but its investments also helped boost results, dispelling some of those concerns.
In particular, unlike other hyperscalers, MS also maintained solid free cash flow (FCF). Its biggest competitor, Alphabet Inc., reported negative FCF of more than $9 billion that day, while Meta Platforms disclosed its first-ever FCF deficit in its earnings report last week. MS was different: although its FCF was down 27%, it recorded $18.63 billion in the first fiscal quarter.
That appears to reflect its control of investment spending.
Capital expenditures and finance leases totaled $45.2 billion in the first fiscal quarter, up about 30% year over year. However, that was below analysts’ estimate of $50.67 billion.
Net income rose from $27.75 billion ($3.72 per share) a year earlier to $36.63 billion ($4.92 per share). This excludes an investment of about $200 million in OpenAI.
Meanwhile, MS disclosed the scale of its Azure cloud division’s business for the first time that day. Quarterly revenue came to $33.17 billion, easily beating the market forecast of $32.32 billion.

[email protected] Song Kyung-jae Reporter