Microsoft: Azure Grows 48%, Quarterly Capex Hits $45.2B

Microsoft closed the first quarter of fiscal year 2027, ending September 30, with revenue of $92.3 billion, a 19% increase over the same period in 2025, according to the announcement released on Wednesday (28). Operating income rose 21%, and adjusted earnings per share of $4.89 exceeded analysts' consensus of approximately $4.73. Shares increased in after-hours trading.

The figure that the market expected was that of Azure. The platform grew 48%, generating $33.17 billion, exceeding analysts' estimates. According to Amy Hood, Chief Financial Officer, revenue for the Microsoft Cloud segment reached $63.9 billion, with growth accelerating to 30%.

A $677 Billion Portfolio

The remaining commercial performance obligation, the stock of signed and unbilled contracts, grew 73% to $677 billion. For a CIO negotiating the renewal of the Enterprise Agreement, this data has practical implications: Microsoft is selling capacity that they do not yet have installed, and the customer's bargaining power decreases when the supplier has a backlog.

The balance sheet itself shows the bottleneck. Capital expenditures totaled $45.2 billion for the quarter, including $7.4 billion in finance leases; cash outlay for real estate and equipment was $39.4 billion. Hood attributed part of the result to delays in the delivery of contracted third-party capacity expected for the first quarter that did not arrive in time.

The executive indicated capex above $50 billion for the second fiscal quarter but reduced the calendar year 2026 projection to approximately $170 billion, down from about $175 billion in July. The downward revision stems from the same third-party delays, not from a slowdown in demand.

The Quarter of 60,000

Two days before the earnings report, on October 26, Microsoft launched a voluntary layoff program for about 60,000 eligible employees, close to 27% of a workforce of 223,000. The offer applies to the United States, Canada, India, and the United Kingdom, with decisions due by early December and departures occurring on December 31, according to reports from CNBC, CBS, and Tom's Hardware.

The company presents the program as a balance between building AI infrastructure and capital efficiency. The numbers for the quarter make the calculation explicit: operational income growing faster than revenue, quarterly capex around $45 billion, and a workforce that the company wants to be smaller. The number of 60,000 refers to those eligible, not actual exits, and the real uptake will only be known after the December deadline.

There is a counterpoint that the market has yet to fully price. In July, Microsoft reported over 30 million paid seats of Microsoft 365 Copilot, and the October balance sheet did not provide an updated count. The company has started emphasizing consumption-based billing, which makes quarter-to-quarter comparisons more challenging for those trying to measure the product's return on the customer side.

Where the Effect Reaches

In India, the program impacts one of Microsoft's key engineering hubs outside the United States, with the Hyderabad development center being among the company's largest. For Indian integrators that resell and implement Azure, like Infosys, TCS, and Wipro, the reading is twofold: the supplier is cutting its own structure while accumulating $677 billion in contracts to fulfill, and some of this deployment work is likely to flow to partners.

In the United Kingdom, where the offer is also valid, the effect compounds with adjustments in the local financial sector, which has been announcing cuts associated with AI, such as the 5,000 positions at Barclays disclosed on October 22. In Brazil, which is not among the countries in the program, the channel is different: banks and insurers that need to maintain data in the country rely on capacity allocated in the Brazil South region, in São Paulo. With Microsoft itself reporting delays in third-party contracted capacity, GPU allocation by region becomes a contractual negotiation item.

The shared risk across the three markets is not in personnel cuts, but rather in the backlog. With a portfolio growing 73% and third-party capacity arriving late, the competition in the upcoming quarters will be for allocation priority, and smaller clients, outside of large multi-year contracts, are likely to be the last to be served.