Microsoft’s cloud growth accelerates, and so too does the spending

Microsoft’s latest quarter was a clean win on the top line, but it came with a familiar catch: the company is still spending heavily to keep its AI push moving. Revenue hit $92.3 billion, up 19% from a year earlier and better than Wall Street expected. Profit came in at $36.6 billion. And Azure, the cloud unit that sits at the center of Microsoft’s AI story, grew 48%, also ahead of estimates.

That matters because Azure is doing more than carrying the quarter. It is the pipe through which Microsoft sells compute to AI companies, and demand is still outrunning supply. Chief Financial Officer Amy Hood said the company expects calendar-year 2026 capital spending to reach about $170 billion, with more than $50 billion due in the current quarter alone. Microsoft’s first-quarter capex was $45.2 billion, above the prior quarter but still below what analysts had expected.

Hood said some of the spending delay came from third-party capacity deliveries arriving later than planned. Microsoft still expects revenue in the current quarter to land between $96.0 billion and $97.1 billion, and it sees operating margins slipping slightly year over year. The company’s shares were up about 2.5% after hours.

The Copilot side of the business is moving too, though Microsoft did not break out sales. Satya Nadella said the number of customers actively consuming credits through usage-based billing rose more than 75% during the quarter. In the prior quarter, Microsoft said Copilot had 30 million paid seats, up from 20 million before that. Investors had been nervous about the product after a slow start, but Microsoft has been pushing it harder, reframing Copilot as a “super app” that will cover coding, chat, and autonomous functions.

The bigger picture is less tidy. Microsoft is buying its way deeper into AI while also trimming costs elsewhere, including through buyouts for roughly 60,000 employees and more layoffs this year. Xbox remains weak, with content and services revenue down 2% and hardware down 14%. So yes, the cloud is humming. The rest of the machine is still being tightened with a wrench.