Microsoft slides as it boosts capex forecast for 2026, tops Q1 estimates

[Microsoft store in London, UK]
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UPDATE: Microsoft provided commentary on its earnings call and said it expects to spend more in fiscal 2026 to grow its business than it previously forecast. It now expects total spend to increase sequentially and the growth rate in fiscal 2026 will be higher than in fiscal 2025, management said, pointing to higher spending on GPUs and CPUs.

Looking to the fiscal second-quarter, revenue is forecast to be between $79.5B and $80.6B, compared to expectations of $80.08B. Included in that is cloud revenue of $32.25B to $32.55B, while Azure is expected to grow 37% in constant currency.

Microsoft (MSFT [https://seekingalpha.com/symbol/MSFT]) shares fell 3.7% in extended trading on Thursday, even as the software giant reported fiscal first-quarter results that topped Wall Street's expectations.

For the period ending Sept. 30, the Satya Nadella-led firm said it earned an adjusted $4.13 per share as revenue rose 18% year-over-year to $77.67B. Included in that was $30.9B from its Intelligent Cloud division, which consists of its Azure cloud unit. Microsoft said Azure revenue grew 40% year-over-year and 39% in constant currency.

Total cloud related revenue was $49.1B for the period, while Productivity and Business Processes revenue came in at $33.02B, above the $32.29B estimate. Included in that was a 17% year-over-year rise in Microsoft 365 Commercial cloud revenue (15% in constant currency); a 26% rise in Microsoft 365 Consumer cloud revenue (25% in constant currency); a 10% increase in LinkedIn revenue (up 9% in constant currency); and an 18% increase in Dynamics 365 revenue, up 16% in constant currency.

More Personal Computing revenue for the period was $13.76B, above the $12.88B estimate.

“Our planet-scale cloud and AI factory, together with Copilots across high value domains, is driving broad diffusion and real-world impact,” said Nadella in a statement. “It’s why we continue to increase our investments in AI across both capital and talent to meet the massive opportunity ahead.”

The company also said that its investment in OpenAI (OPENAI [https://seekingalpha.com/symbol/OPENAI]) impacted its results during the quarter, as it dragged down net income and earnings per share by $3.1B and $0.41, respectively.

"In the first quarter of fiscal year 2025, net income and diluted earnings per share were impacted by losses from investments in OpenAI, which resulted in a decrease in net income and diluted earnings per share of $523 million and $0.07, respectively," Microsoft said in the release.

A consensus of analysts expected the company to earn an adjusted $3.67 per share on revenue of $75.55B.

Seeking Alpha analyst Vinay Utham [https://seekingalpha.com/author/vinay-utham-cfa] said the results were “very strong,” as both the top and bottom lines topped Wall Street estimates.

“I find the EPS beat, in particular, to be really impressive,” Utham wrote in an email. “I am extremely impressed with the growth seen in Azure, which came in at 40% (and 39% in constant currency).”

The company will host a conference call at 5:30 p.m. EST to discuss the results, where it will also provide guidance for the coming quarter.

_(This story has been updated to add information from Microsoft's earnings call.)_

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