Microsoft Reports Impressive $27.7 Billion Profit for Q1 FY2026

Microsoft Reports Q1 FY2026 Financial Results Amid Azure Outage

On October 29, 2025, Microsoft experienced a significant Azure outage that commenced around 16:00 UTC, just hours ahead of its earnings announcement for the first quarter of the 2026 fiscal year. Despite the disruption, which impacted not only its services like Xbox but also third-party providers such as Alaska Airlines, Microsoft has revealed its financial outcomes for the quarter ending September 30, 2025.

The source of the service outage was traced back to an unintentional configuration adjustment concerning its Azure Front Door (AFD) service. This incident showcased the complexities involved in managing cloud infrastructure effectively.

Financial Performance Highlights

Microsoft reported an impressive revenue of $77.7 billion for the quarter, marking an 18% year-over-year increase. This figure not only exceeds the $76.4 billion reported in the previous fiscal quarter (Q4 FY25) but also highlights the company’s robust growth trajectory.

Operating income surged to $38.0 billion, reflecting a substantial 24% growth compared to the same quarter last year. On a Generally Accepted Accounting Principles (GAAP) basis, the net income stood at $27.7 billion. Furthermore, Microsoft returned approximately $10.7 billion to shareholders through a combination of dividends and stock buybacks.

Investments in OpenAI and Non-GAAP Adjustments

In its filing, Microsoft disclosed a non-GAAP adjustment related to its investment in OpenAI, resulting in a $3.1 billion reduction in net income. Notably, Microsoft recently revised its partnership terms with OpenAI, which saw its stake in the for-profit arm decrease from 32.5% to 27%, while extending its intellectual property rights through 2032.

Performance by Segment

Microsoft’s cloud services were the standout performers, with revenue from Azure and related services soaring by 40%. The Productivity and Business Processes segment, encompassing the Office suite, reported a 17% increase in revenue. This growth was buoyed by a 17% rise in Microsoft 365 Commercial cloud revenue and an 18% boost in Dynamics 365. Additionally, LinkedIn saw a revenue increase of 10%, while search and news advertising revenues climbed by 16%.

Leadership Insights

Amy Hood, Executive Vice President and CFO, emphasized that Microsoft had a “strong start to the fiscal year.”Meanwhile, Satya Nadella, the CEO and Chairman, indicated that the company remains committed to increasing its investments in both capital and talent for artificial intelligence, positioning itself to capitalize on the “massive opportunity ahead.”

For more insights, you can check the official earnings call report.

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