Microsoft Q1 Earnings & Revenues Beat on Cloud, AI Strength

Core Insights - Microsoft reported first-quarter fiscal 2026 earnings of $4.13 per share, exceeding the Zacks Consensus Estimate by 13.15% and reflecting a year-over-year increase of 25.2% [1] - Revenues reached $77.6 billion, an 18.4% year-over-year growth, surpassing the Zacks Consensus Estimate by 3.62% [1] - Strong demand for cloud and AI offerings was highlighted, with revenues growing 17% year-over-year at constant currency [1] Financial Performance - Commercial bookings surged by 112%, significantly driven by Azure commitments from OpenAI and growth in high-value contracts for Azure and M365 [2] - Commercial remaining performance obligation rose to $392 billion, a 51% increase year-over-year, nearly doubling over the past two years [3] - Microsoft Cloud revenues were $49.1 billion, growing 26% year-over-year, with a gross margin percentage of 68% [3] Segment Performance - The Productivity & Business Processes segment contributed 42.5% to total revenues, with a 17% year-over-year increase to $33.02 billion [5] - M365 commercial cloud revenues increased by 17%, driven by ARPU and seat growth, with paid M365 commercial seats growing 6% year-over-year [6] - The Intelligent Cloud segment reported revenues of $30.89 billion, growing 28% year-over-year, primarily driven by Azure [11] Capital Expenditure and Guidance - Total capital expenditures for the fiscal first quarter were $34.9 billion, with a focus on short-lived assets like GPUs and CPUs [24] - Microsoft expects total company revenues for the second quarter of fiscal 2026 to be between $79.5 billion and $80.6 billion, representing growth of 14% to 16% [28] - The company anticipates Azure and other cloud services revenue growth of approximately 37% in constant currency for the second quarter [32] Strategic Developments - Microsoft secured exclusive rights for Azure with OpenAI until AGI achievement or through 2030, with an incremental $250 billion in Azure services contracted [27] - The Azure AI Foundry now serves 80,000 customers, including 80% of the Fortune 500, showcasing significant adoption of AI capabilities [19] - Microsoft plans to increase total AI capacity by more than 80% this year and double its data center footprint over the next two years [18]