Microsoft earnings live: Microsoft beats Q1 expectations on top and bottom line on AI growth

Microsoft CEO Satya Nadella says the company brought online 24 new data centers this past quarter across 5 continents and is bringing capacity online faster.

He says the Windows developer is also getting more from the infrastructure it already has by optimizing across silicon, models, and software.

Microsoft CEO Satya Nadella says more than 10 million LinkedIn members use its AI-powered job search daily, and 25,000 customers use agentic hiring solutions.

“Recruiters using a hiring assistant are finding interview-quality applicants 33% faster, while reviewing 83% fewer profiles to find qualified matches.”

Microsoft CEO Satya Nadella says Copilot continues to grow.

Customers with 50,000 Copilot seats increased 8x year-over-year. Daily users are also up close to 50% quarter-over-quarter, and 5x year-over-year.

Microsoft CEO Satya Nadella and CFO Amy Hood are set to provide updates on Microsoft’s Q1 results. Check back for regular updates and listen in here.

Microsoft 365 commercial cloud and Microsoft 365 consumer cloud both jumped in Q1, climbing 17%. The company attributed the growth to increased revenue per user and higher user numbers.

Microsoft reports revenue for Microsoft Cloud as well as Azure. Both are important metrics to watch, but they can cause confusion if you don’t have a clear understanding of the difference between them.

Azure is Microsoft’s general cloud computing platform. It allows users to access applications and services, including Microsoft’s AI platforms, from nearly any internet-connected device.

Microsoft Cloud, however, refers to a broader array of services inclusive of Azure and includes Microsoft 365 commercial cloud and what the company refers to as its industry solutions cloud.

Investors focus on Azure because it’s where they can quickly gauge growth in Microsoft’s AI revenue.

Microsoft (MSFT) stock is climbing in extended trading after Wednesday night’s results, and its quarterly filing shows how much of the business now runs through OpenAI.

OpenAI paid Microsoft $10 billion in the quarter that ended in September, including revenue-sharing payments. That’s about 11% of Microsoft’s $92 billion in revenue, and more than its Xbox and Windows businesses brought in combined.

Microsoft also owns about 24% of the ChatGPT maker. OpenAI owed it about $7 billion at the end of the quarter, up from $6 billion three months earlier.

Watch whether that reliance starts to weigh on the stock. Microsoft’s backlog of signed contracts stalled at about $677 billion, and new bookings fell 12% from a year earlier.

Ahead of Microsoft’s earnings call, recall that the company has revamped its quarterly reporting structure, which is now divided into Agents and Infra, and Devices and Consumer.

The Agents and Infra segment includes the revenue from Microsoft’s Azure, Microsoft 365 cloud services, productivity and server licensing, industry solutions, and frontier and support services.

The Devices and Consumer segment includes sales tied to Microsoft’s search and advertising businesses, Xbox, and Windows OEM and devices.

Microsoft said roughly three-quarters of its $45.2 billion in capital expenditures were for “short-lived assets.”

That includes things like CPU and GPU chips, as well as networking equipment for data centers.

Microsoft’s remaining commercial performance obligations, contracts that the company hasn’t been paid for yet, rocketed 73% year over year in Q1 to $677 billion.

That’s the revenue the company will realize as it scales up AI computing capacity over time.

Microsoft says the smaller historical sequential dip is a result of a large Azure commitment in the quarter.

Slowing demand for PCs and Xbox game consoles dinged Microsoft’s Devices and Consumer segment in Q1. The company says Xbox hardware sales fell some 14%, while Windows OEM and devices revenue fell 22%.

Xbox console and PC prices have ballooned due to the ongoing memory and storage shortage.

Microsoft, however, also attributes the PC declines to difficult comparisons versus last year, when the company was ending support for Windows 10, forcing enterprise customers to buy new PCs during the period.

“We are delivering greater capability, choice, control, and cost efficiency for customers across our entire stack,” Microsoft CEO Satya Nadella said in a prepared statement.

“By helping organizations build and own their own intelligence, and earning trust through agent safety and security, we are translating our innovation into growing adoption and real-world impact across every industry.”

October was the month investors gave this year’s beaten-down software stocks a second chance. Four sessions later, they’re taking it back and buying cybersecurity instead.

For most of October, the trade was easy to spot: Sell chips, buy software. Through the Oct. 22 close, the median stock in a 45-stock Yahoo Finance software basket was up about 13% for the month, while the iShares Semiconductor ETF (SOXX) had lost about 16%.

Then the trade flipped. Since that close, SOXX has jumped about 7%, and the First Trust Nasdaq Cybersecurity ETF (CIBR) has gained about as much, while 26 of the 45 software stocks fell through Tuesday.

Since the Oct. 22 close, the 20 chip stocks in the S&P 500 (^GSPC) have added nearly $570 billion in market value, according to Yahoo Finance calculations through Tuesday. The rest of the index lost about $40 billion.

“For now, early trading this week looks more like rotation within AI than a broad return of conviction,” Vanda Research’s Viraj Patel wrote Wednesday.

Software isn’t breaking down. The equal-weight SPDR S&P Software & Services ETF (XSW) closed at a record on Monday.

Microsoft (MSFT), the biggest software name by market cap, reports after Wednesday’s close. If its AI business keeps growing, the list of winners could get longer. Read more.

Yahoo Finance Executive Editor Brian Sozzi takes a closer look at Microsoft’s (MSFT) employee buyouts on Sozzi Unleashed, examining the role of artificial intelligence in the tech giant’s evolving workforce strategy. Sozzi breaks down what’s driving the changes, how AI could reshape Microsoft’s staffing needs, and whether another round of layoffs could be on the horizon.

After releasing its revamped version of Copilot, Microsoft CEO Satya Nadella said the company will need to win users’ trust.

“Trust is going to be the biggest issue for us,” Nadella told Deirdre Bosa. Read more.

Stocks edged higher for a third day in a row on Wednesday, ahead of the Federal Reserve’s policy decision and earnings from Alphabet (GOOG) and Microsoft (MSFT).

The Tech (XLK) sector advanced, extending gains as shares of chip giants Nvidia (NVDA), AMD (AMD), and Broadcom (AVGO) all rose. The move higher followed SK Hynix (SKHY), which saw profits increase sevenfold last quarter.