Microsoft Shares Fall Despite Q1 Earnings Beat and Strong Azure Growth

Microsoft reported fiscal Q1 earnings that surpassed analyst expectations with revenue of $77.7 billion and earnings per share of $3.72, driven by a 40% growth in Azure revenue and a 26% rise in commercial cloud revenue. Despite the strong financial performance, Microsoft’s stock declined over 2% in after-hours trading, largely due to investor concerns about the company's increased capital expenditures—up 74% to $34.9 billion, with significant investment in GPUs and CPUs for Azure infrastructure. The company also took a $3.1 billion net income hit from its equity investment in OpenAI, reflecting a 41-cent reduction in earnings per share, though adjusted EPS excluding OpenAI losses was $4.13. CEO Satya Nadella highlighted plans to expand AI capacity by over 80% this year and double the data center footprint within two years, signaling continued bullishness on AI-driven cloud demand. While Microsoft maintains strong financial health with robust margins and a solid balance sheet, investor expectations appear highly optimistic, contributing to stock volatility despite the company’s continued growth and leadership in AI and cloud services. Overall, Microsoft’s results underscore its critical role in global productivity and AI innovation amid a challenging market environment.