Microsoft’s stock climbed 4% in after-hours trading on Wednesday following the disclosure of quarterly earnings that surpassed analyst expectations, propelled primarily by robust performance in its Azure cloud division. The company’s revenue increased 19% year over year for the quarter ending September 30, with Azure establishing itself as the company’s largest individual business segment.
The technology firm has been aggressively expanding its data center footprint to address surging artificial intelligence infrastructure needs while maintaining positive free cash flow, a distinction that sets it apart from several competitor hyperscalers. Microsoft reported $45.2 billion in capital expenditures and finance leases for the quarter, representing a roughly 30% increase from the prior year. The company noted that approximately 75% of capital expenditures are now allocated to short-lived assets such as processors and graphics processing units, compared with 66% in recent quarters and 50% one year prior, underscoring management’s focus on infrastructure capable of generating near-term revenue.
Net income reached $36.63 billion, or $4.92 per share, compared with $27.75 billion, or $3.72 per share, in the year-ago period. Azure generated $33.17 billion in disclosed revenue during the quarter, exceeding analyst projections of $32.32 billion, though growth moderated to 48% from 42% in the prior quarter. Free cash flow declined 27% to $18.63 billion.
The company reorganized its operating structure into two segments from the previous three-segment framework used for the past 11 years. The Agents and Infra segment posted revenue growth of almost 25% to $76.8 billion, while the Devices and Consumer segment saw revenue slip 3% to $15.48 billion. Device and Windows licensing sales fell 22% due to elevated memory and storage costs.
Separately, Microsoft announced it would eliminate 4,800 positions during the quarter and subsequently offered buyouts to as many as 60,000 employees as the company works to manage the financial demands of its artificial intelligence expansion while maintaining capital discipline.
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