Microsoft Corp (NASDAQ:MSFT) stock fell 3.44% (As on October 30, 11:34:56 AM UTC-4, Source: Google Finance) after the company reported stronger-than-expected first-quarter earnings, driven by cloud and AI growth, but shares fell in after-hours trading as investors pondered slowing Azure revenue growth. Azure and other cloud services were up 40% year-on-year, which was slightly below Wall Street expectations and pressured shares despite the overall strong results. Microsoft Cloud overall generated $49.1 billion, up 26% from last year. Microsoft highlighted strong future revenue visibility, reporting a commercial remaining performance obligation (RPO) of $392 billion, up 51% from last year. However, Microsoft revealed a major drop in profit due to what it termed was an "equity method investment" in OpenAI Group PBC, resulting in a 41-cents-per-share hit to its earnings and a $3.1 billion drop in its net income. Even so, the company's bottom line was still healthy at $27.7 billion, up from $24.67 billion in the year-ago quarter. The most impressive result came from Microsoft's Intelligent Cloud unit, which includes the Azure cloud business. It delivered total revenue of $30.9 billion in the quarter, up 28% from a year earlier and above the Street's estimate of $30.25 billion.
Moreover, Productivity and Business Processes revenue, including Microsoft 365 and Dynamics 365, rose 17% to $33 billion. Commercial cloud subscriptions for Microsoft 365 climbed 17%, while consumer cloud subscriptions jumped 26%. LinkedIn revenue increased 10% and Dynamics 365 revenue grew 18%. The More Personal Computing segment, which includes Windows, Surface devices, and gaming, generated $13.8 billion, up 4% from a year ago, surpassing estimates of $12.8 billion. Windows OEM and devices sales rose 6%, while Xbox content and services inched up 1%. Search and news advertising revenue, excluding traffic acquisition costs, grew 16%.
MSFT in the first quarter of FY26 has reported the adjusted earnings per share of $3.72, beating the analysts' estimates for the adjusted earnings per share of $3.67. The company had reported the adjusted revenue growth of 18 percent to $77.7 billion in the first quarter of FY26, beating the analysts' estimates for revenue of $75.3 billion. Operating income climbed 24% to $38 billion.
Looking to the current quarter, Microsoft said it's calling for revenue of between $79.5 billion and $80.6 billion. The midpoint of that range is just ahead of the Street's forecast for $79.95 billion in revenue.
On the other hand, the company delivered its financial results just hours after Azure and Microsoft 365 experienced a major outage, taking down various websites and services across the globe. Microsoft promised it would fully recover before the day is out, but it probably did little to ease the concerns of shaky investors.