Microsoft Spends $45.2 Billion on Capex as Azure Revenue Grows 48% in Its First Quarter

Microsoft on October 28, 2026 reported revenue of $92.3 billion for its fiscal first quarter, up 19%, with Azure revenue up 48%. Capital expenditure came to $45.2 billion, below the $50 billion Microsoft had projected for the quarter, Reuters reported.

The results landed on the same day as Alphabet's and a week after Meta's, at a time when investors are questioning how much cash the AI buildout is consuming. Meta followed its October 22 results with plans for up to $95 billion in stock sales to help fund its spending. Microsoft's quarter showed rising spending alongside positive free cash flow.

What did Microsoft report for the quarter?

Microsoft said in its earnings release that revenue for the quarter ended September 30, 2026 was $92.3 billion and operating income was $45.9 billion, up 19% and 21% from a year earlier. Net income rose 32% to $36.6 billion on a GAAP basis and 18% to $36.4 billion on an adjusted basis that excludes its investments in OpenAI.

Microsoft Cloud revenue was $63.9 billion, up 30%. Azure brought in $33.2 billion, compared with $22.4 billion a year earlier, the release shows. That beat the $32.84 billion analysts expected, according to Visible Alpha data cited by Reuters. Microsoft began disclosing Azure revenue in dollars in September 2026, rather than only as a growth rate (Reuters).

The consumer side shrank. Revenue in the new Devices and Consumer segment fell 3% to $15.5 billion, with Windows OEM and devices revenue down 22% and Xbox content and services down 2%. The Agents and Infra segment, part of the reporting change Microsoft announced in September, grew 25% to $76.8 billion.

Why was Microsoft's capital spending below its own plan?

Microsoft spent $45.2 billion on capital expenditure in the quarter, up from $34.9 billion a year earlier but short of its own $50 billion projection, and the company blamed delayed third party capacity deliveries, Reuters reported. Jonathan Neilson, Microsoft's vice president of investor relations, said the shortfall reflected timing, not a change to the company's underlying spending plans.

The year over year increase works out to about 30%, by this site's arithmetic. Microsoft had forecast capital expenditure of $190 billion in 2026, according to Reuters. Third party capacity means data center space and computing power that other companies supply to Microsoft rather than Microsoft building it itself. On October 12, Microsoft unveiled its Maia 300 chip with multi-gigawatt deployments planned from 2027, and on October 18 the Telegraph reported that it had walked away from an anchor role at an Nscale site in England.

The cash flow statement in the release shows a narrower measure: additions to property and equipment of $39.4 billion, roughly double the $19.4 billion of a year earlier, by this site's arithmetic. The release itself does not give a total capital expenditure figure.

How does Microsoft's cash flow compare with Alphabet and Meta?

Microsoft generated $18.6 billion in free cash flow in the quarter, about $10 billion more than the $8.54 billion analysts expected, according to Reuters, while Alphabet and Meta both reported negative free cash flow for the same July to September period. Free cash flow is the cash left from operations after spending on equipment and buildings.

The Microsoft figure matches the release: $58.0 billion of cash from operations minus $39.4 billion of additions to property and equipment leaves about $18.6 billion, by this site's arithmetic. Alphabet reported negative free cash flow of $9.07 billion on October 28, a deeper deficit than the $2.70 billion analysts expected, and its shares fell more than 8%, CNBC reported. Meta reported negative free cash flow of $2.12 billion on October 22 (CNBC).

Azure and Google Cloud are not defined the same way, so the cloud row compares each company's own reported unit, not identical businesses. On those reported figures, Azure was about $2.5 billion larger than Google Cloud in the quarter, while Google Cloud grew more than twice as fast, by this site's arithmetic.

What does Microsoft's backlog say about demand?

Microsoft's commercial remaining performance obligation rose 73% to $677 billion, the release shows, a backlog that is growing faster than revenue. Chief financial officer Amy Hood said in the release that Microsoft Cloud growth accelerated to 30% and that results beat expectations on revenue, operating income and earnings per share.

Microsoft's investment in OpenAI still moves its headline profit. Investments in OpenAI added a net gain of $207 million to net income this quarter, after a $3.1 billion loss a year earlier, according to the release. Microsoft also returned $10.2 billion to shareholders through dividends and buybacks.

What we don't know yet

• How much of the $4.8 billion capex shortfall Microsoft expects to spend in its second fiscal quarter; the company gives forward guidance on its earnings call, not in the release.
• Which third party capacity deliveries were delayed, and by how much.
• How the $45.2 billion capex figure reconciles with the $39.4 billion of property and equipment additions in the cash flow statement.
• Whether Microsoft's 2026 capex forecast of $190 billion, as cited by Reuters, still stands after this quarter.