Microsoft earnings beat estimates but higher spending outlook disappoints street

Shares of Microsoft fell up to 4% in afterhours trading on Wall Street on Wednesday despite positive results, after a higher spending outlook, coupled with an outage on Azure, left the street disappointed.Microsoft reported revenue of $77.67 billion, higher than the estimates of $75.33 billion, while its Earnings Per Share (EPS) of $3.72, was also higher than the $3.67 expectation. On a year-on-year basis, Microsoft reported 18% revenue growth.

The company’s Intelligent Cloud Unit, which includes Azure, grew by 28% from last year to $30.9 billion, higher than estimates of $30.25 billion. Azure, which competes with Google Cloud and Amazon Web Service, grew 40% year-on-year, higher than the 38% estimate.

For the second quarter of fiscal 2026, Microsoft expects revenue to be between $79.5 billion to $80.6 billion. The mid-point of $80.05 billion was marginally higher than the $79.95 billion analysts projection. Azure’s growth is projected to be 37% in constant currency, again in-line with expectations.Microsoft expects capex growth in fiscal 2026 to be higher than the previous fiscal, contrary to their previous quarter remarks of a slowdown in capex. The increase in capex will be to build the infrastructure necessary to support AI demand.

What may also have left the street disappointed is the OpenAI investment, which was cheered earlier on Tuesday, but resulted in a $3.1 billion hit to profitability, equivalent to $0.41 per share.

Results were reported just hours after Azure and 365 services of Microsoft experienced an outage, resulting in various websites and games being down for hours. The issue is yet to be resolved.

Shares of Microsoft are down 4% in extended trading at $520. The stock has risen 30% so far on a year-to-date basis.