Microsoft falls 1.4% as Azure's 48% growth meets spending jitters

The quarter put two of Microsoft's stories on display at once. Revenue rose 19% in constant currency to $92.3 billion, ahead of expectations for about 17%, and Azure's 48% growth came in roughly three percentage points above forecasts. Operating margin reached 49.8%, above the 48.4% to 48.7% implied by guidance, while Microsoft 365 commercial cloud growth accelerated to 18% in constant currency from 15% in the previous quarter. AI adoption added to the picture: daily Copilot users rose nearly 50% quarter over quarter, and Foundry revenue more than tripled year over year.

The offsetting detail was commercial bookings, which fell 11% in constant currency after 11% growth in the prior quarter, against a tougher year-ago comparison. Remaining performance obligations stood at $677 billion, up 73% year over year.

What pulled the shares lower was the spending path. Bank of America said GPU and CPU efficiency improvements were helping Microsoft generate more revenue from existing infrastructure, partly offsetting delays in third-party capacity deliveries. Those delays are expected to push some capital spending into the second half of the fiscal year, with Bank of America forecasting $125 billion of spending there versus $96 billion in the first. Whether revenue gains keep pace with that buildout appears to be the question investors are now weighing.