Microsoft reported quarterly revenue and profits ahead of analysts’ expectations, with Azure revenue growth climbing to 40% as the company continued to deal with the effects of a widespread cloud outage.
The company’s capital expenditures reached a record high of $34.9 billion — reflecting the company’s long-term buildout of cloud infrastructure to meet demand for artificial intelligence. The company had projected capital spending of more than $30 billion for the quarter.
Along with that unprecedented buildout, Microsoft sought to address investor concerns about a potential AI bubble, by highlighting its commercial remaining performance obligation (RPO), a measure of future contracted revenue. That backlog grew 51% year-over-year to $392 billion.
The company also disclosed for the first time that this RPO has a weighted average duration of roughly two years, a move intended to show investors that its record capital spending is supported by strong, long-term customer demand.
Revenue was $77.7 billion for the quarter ended Sept. 30, Microsoft’s first quarter of fiscal 2026. That was up 18%, and compared with average analyst expectations of $75.39 billion. The company said the result was driven by strong demand for cloud and AI services.
Profits were $27.7 billion, or $3.72 per share, beating expectations of $3.66 per share.
Earlier Wednesday, an Azure cloud services outage disrupted operations for customers worldwide including Alaska Airlines, Xbox users and Microsoft 365 subscribers. Microsoft reported as of early afternoon that it was rolling back the faulty configuration and that customers should see improvements.
Microsoft stock was down by about 3% in after-hours trading. The company’s market value reached $4 trillion after the announcement of its new OpenAI deal on Tuesday morning.
