On October 30, Microsoft, whose market value reached US$4 trillion, released its first quarter results for the fiscal year 2026 ending on September 30. Despite growth in both revenue and net profit, Microsoft’s stock price fell nearly 4% after hours.
According to the financial report, Microsoft’s revenue in the first fiscal quarter was US$77.7 billion, a year-on-year increase of 18%. Net profit was US$27.7 billion, a year-on-year increase of 12%.
But Microsoft’s capital expenditures hit a record $34.9 billion this quarter. Microsoft previously stated that it expects capital expenditures in the first quarter of fiscal 2026 to exceed US$30 billion, and the actual number is higher than previously expected.
During the earnings conference call, Microsoft Executive Vice President and Chief Financial Officer Amy Hood said that about half of the expenditures were for short-term assets, mainly the purchase of GPUs and CPUs to support the growing demand for the Azure platform and the continued development of artificial intelligence solutions. The remaining spending is on long-term assets to support earnings over the next 15 years and beyond, including $11.1 billion in financing leases, primarily for large data centers.
Microsoft Chairman and CEO Satya Nadella said in the financial report that it will continue to increase investment in the field of artificial intelligence, including capital and talent, to seize the huge opportunities in the future. He also said that across all Microsoft products, monthly active users of artificial intelligence functions have reached 900 million.
In addition, the company’s gross profit margin in the first fiscal quarter was 69%, a year-on-year decrease. Amy Hood said the main reason is investment in the field of artificial intelligence, including the impact of the large-scale expansion of artificial intelligence infrastructure and the growth in the use of artificial intelligence product functions.
Microsoft also said that as demand accelerates, the company’s spending on GPUs and CPUs is also increasing. As a result, total spending will increase sequentially, with growth rates expected to be higher in fiscal 2026 than in fiscal 2025.
Specific to the performance of each department, Microsoft’s intelligent cloud department’s revenue was US$30.9 billion, a year-on-year increase of 28%. Revenue from Azure and other cloud services increased by 40%, exceeding expectations.
More personal computing business revenue was $13.8 billion, a year-on-year increase of 4%. Among them, Windows OEM and equipment revenue increased by 6%.
Microsoft’s Productivity and Business Processes division had revenue of $33 billion in the first fiscal quarter, a year-on-year increase of 17%. LinkedIn revenue grew 10%. Among them, the talent solutions business continued to be affected by the weak recruitment market.
In addition, Microsoft disclosed its investment in OpenAI. In the first quarter of fiscal 2026, Microsoft’s net profit decreased by $3.1 billion due to losses on its investment in OpenAI.
On October 28, Microsoft announced that it had signed the latest cooperation agreement with OpenAI, and also announced that OpenAI had signed a contract to purchase Azure services worth US$250 billion. Microsoft said its investment in OpenAI has yielded a roughly 10-fold return.
