Microsoft keeps growing, Earns More, and Plans Massive Expansion of Data Centers

Microsoft is on a growth trajectory due to the increasing demand for AI and cloud offerings, as well as significantly increased revenue and profits. Therefore, investment is necessary. “We will increase our total AI capacity by over 80 percent this year and roughly double our total data center space in the next two years to accommodate the demand signals we are observing,” explains Microsoft CEO Satya Nadella. Nevertheless, the company's stock price has fallen by around four percent in after-hours trading.

However, this could also be due to yesterday's Microsoft's cloud disruption and outages at Outlook and others. Users reported outages of numerous services, including Office and Minecraft. Hours later, Microsoft's cloud is on the mend; Azure should now be largely functional again. The public Azure status message currently shows no active service problems.

AI Cloud as a Revenue Driver

The business period that ended at the end of September also looks good for the company, Microsoft's first quarter of fiscal year 2026. Total revenue, according to the company, increased by 18 percent year-on-year to 77.7 billion US dollars, operating profit by 24 percent to 38 billion dollars, and net profit by 12 percent to 27.7 billion dollars. This has at least slightly exceeded industry expectations in all cases, CNBC reports.

Revenue from Microsoft's intelligent cloud, which includes Azure, grew by 28 percent to 30.9 billion dollars. Azure itself and other cloud offerings grew by 40 percent. In the earnings call, Nadella points to “80,000 customers, including 80 percent of Fortune 500 companies,” using Azure AI.

Office, Windows, and Edge are Growing

The “Productivity and Business Processes” segment, which includes Office products and LinkedIn, generated revenue of 33 billion dollars. That's 17 percent more than in the same quarter last year, when Microsoft's quarterly report showed a big increase in Xbox and cloud products. Revenue from the company's PC segment, which includes Windows, Xbox, and search advertising (Bing), grew by 4 percent to 13.8 billion dollars in the same period. The PC market appears to be continuing to recover, as Windows revenue alone increased by 6 percent. Additionally, user numbers for Microsoft's browser are increasing. According to Nadella, “Edge has now expanded its market share for 18 consecutive quarters.”

For the current second quarter of fiscal year 2026, Microsoft expects total revenue between 79.5 and 80.6 billion dollars. This would equate to annual growth of 14 to 16 percent. Investors, however, do not seem satisfied with the software company. After the stock price rose by around 28 percent since the beginning of the year, the stock lost nearly four percent of its value after closing hours.

(fds)