Microsoft posts $27.7 billion profit in Q1 FY2026

Following the massive Azure outage that began around 16:00 UTC on October 29, 2025, just hours before its earnings call, Microsoft has announced its financial results for the first quarter of its 2026 fiscal year.

The company attributed the widespread service disruption, which affected Microsoft's own services, like Xbox, and third parties like Alaska Airlines, to an inadvertent configuration change impacting its Azure Front Door (AFD) service.

Based on the numbers the Redmond giant posted, it pulled in revenue of $77.7 billion for the quarter ending September 30, 2025, an 18% increase year-over-year. This figure is slightly higher than $76.4 billion in revenue the company reported in the previous quarter, FY25 Q4.

The company's operating income jumped to $38.0 billion, a significant 24% increase from the same period last year. On a GAAP basis, net income was $27.7 billion. Microsoft also returned a cool $10.7 billion to its shareholders through dividends and stock buybacks.

The company notes that its investment in OpenAI required a non-GAAP adjustment. The filing details a decrease in net income of $3.1 billion directly related to its OpenAI partnership.

It may be of interest to you that Microsoft and OpenAI recently revised their historic partnership. The new terms altered Microsoft's position in OpenAI's for-profit arm to around 27%, down from its previous 32.5% stake, while extending its IP rights through 2032.

As for the main drivers behind these numbers, Cloud, as usual, was the star performer, with Azure and other cloud services revenue rocketing up by 40%.

The Productivity and Business Processes segment, which includes its Office suite, saw a 17% increase in revenue. This was led by a 17% increase for Microsoft 365 Commercial cloud revenue and an 18% jump for Dynamics 365. LinkedIn revenue grew 10%, while search and news advertising rose 16%.

Executive VP and CFO Amy Hood said that Microsoft delivered a "strong start to the fiscal year". CEO and Chairman Satya Nadella added that the company will continue to increase its investments in both capital and talent for AI to meet the "massive opportunity ahead".

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Posted Thursday 30 October 2025 at 12:13 pm AEST (my time).

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