Microsoft (MSFT) Q1 2027 earnings summary

Executive summary

• Revenue was $92.279B, up 19% YoY; operating income was $45.915B, up 21%, and GAAP diluted EPS was $4.92, up 32%.

• Microsoft Cloud revenue reached $63.9B, up 30%; Azure grew 48% as AI capacity demand remained above supply.

• Agents and Infra revenue rose 25% to $76.8B; Devices and Consumer revenue fell 3% to $15.5B.

Financial highlights

• Gross margin was $62.559B, up 17%; gross margin percentage declined 1 point to 68%.

• GAAP net income was $36.629B, up 32%; adjusted net income excluding OpenAI investment impacts was $36.422B, up 18%.

• Adjusted diluted EPS excluding OpenAI investment impacts was $4.89, up 18%; GAAP diluted EPS was $4.92, up 32%.

• Operating expenses rose 6% to $16.6B; cash from operations increased 29% to $58.0B, while free cash flow was $18.6B.

• Returned $10.2B to shareholders through dividends and share repurchases.

Outlook and guidance

• Q2 revenue guidance was $96B–$97.1B, with COGS of $32.7B–$32.9B and OpEx of $18.5B–$18.6B; operating margin expected slightly lower YoY.

• Q2 Azure growth was guided at 49%–50% in constant currency; demand was expected to remain above supply, with delayed third-party GPU contracts shifting to H2.

• Q2 M365 Commercial Cloud growth was expected at ~19% in constant currency; M365 Consumer Cloud in the low teens, and Productivity and Server Licensing down mid- to high-single digits.

• Q2 CapEx was expected to exceed $50B and calendar-year spend to reach ~$170B; FY27 free cash flow expected to remain positive.