Microsoft shares initially jumped but later reversed on Thursday as investors weighed stronger-than-expected fiscal first-quarter results against the company's plans to raise at least $25 billion through a U.S. bond offering. The stock had climbed 4.3% in after-hours trading Wednesday and 3.2% premarket Thursday to $548.19, before falling back after the open.
For the quarter, Microsoft reported adjusted earnings of $4.89 per share on revenue of $92.3 billion, beating analyst estimates of $4.71 per share and $90.6 billion. Revenue rose 19% year over year. Azure, the company's cloud computing unit, was the standout performer, with revenue growth of 48% versus the 44.3% expected. CFO Amy Hood guided to 49% Azure growth in the fiscal second quarter, above the 44.6% analysts had forecast. Azure passed the $100 billion annual revenue milestone during fiscal 2026.
Capital expenditures came in at $45.2 billion, below the $51 billion Wall Street expected but up from $34.9 billion a year earlier. The shortfall was attributed to delays in third-party capacity deliveries rather than reduced AI investment plans. Hood said capex should exceed $50 billion in the second quarter and accelerate in the second half of fiscal 2027, primarily due to CPUs, GPUs, and higher memory and storage costs. The lighter-than-expected capex initially pressured chip stocks in late trading.
Free cash flow was $18.6 billion, down from $25.7 billion a year earlier but well above the $7.99 billion expected. Bank of America Securities analyst Tal Liani raised his price target on Microsoft to $630 from $600 and maintained a Buy rating, writing that Microsoft's positioning across infrastructure, models and software 'continues to provide multiple paths to monetize AI demand.' The company's devices and consumer segment fell 3% due to weakness in Xbox, Windows and devices, while Microsoft also offered voluntary exit packages to 60,000 employees as part of cost-control efforts.
