Microsoft Azure growth accelerates to 48 percent

Microsoft reported quarterly revenue of $92.28 billion, exceeding the $90.69 billion consensus estimate from LSEG. The company posted adjusted earnings per share of $4.92, a 32 percent increase from the same period last year. That figure surpassed analyst expectations of $4.73. Shares rose approximately 3 percent in after-hours trading on Wednesday, moving toward a record high.

The Azure cloud division drove the performance. Revenue from the segment climbed 48 percent to $33.17 billion, up from $22.38 billion a year earlier. This growth rate outpaced the 44 percent reported in FactSet consensus estimates. It also exceeded the company's internal guidance of about 45 percent. Microsoft disclosed this specific quarterly Azure revenue figure for the first time after announcing reporting changes in September.

Investor sentiment for the stock shifted in July. Earlier in the year, shares fell about 25 percent to the mid-$300s amid concerns regarding artificial intelligence positioning. The decline reversed as Azure growth accelerated and paid Copilot seats gained traction. The stock rose roughly 51 percent from its late-June low through Wednesday's close.

Capacity constraints affected previous quarters, leaving some Azure revenue unrealized. Microsoft added 24 new data centers across five continents during the latest period. The company stated that third-party supplier delays pushed some AI spending into later periods. Gains in GPU efficiency allowed Microsoft to serve more customers and increase revenue per token.

Capital expenditures including finance leases totaled $45.2 billion. This amount was lower than the $51 billion analysts expected and the $50 billion management projected. CFO Amy Hood noted the company will access additional funding when attractive. Microsoft repurchased $2.9 billion of shares, avoiding the equity issuance seen at Alphabet and Meta.

CEO Satya Nadella reported that daily users of Copilot rose 50 percent year over year. He described the software as the new operating system for work. User satisfaction improved by nearly 20 percent from the prior quarter to an all-time high. The company did not release new figures for paid seat counts.

Management guided Azure growth of 49 percent to 50 percent in constant currency for the current quarter. This outlook exceeded analyst forecasts of about 46 percent. Total revenue is projected between $96 billion and $97.1 billion, higher than the $95.6 billion street estimate. The company plans to spend over $50 billion on capital expenditures in the second quarter and $170 billion over the calendar year.

CNBC's Investing Club raised its price target on the stock to $580 from $550. Trading on Thursday may face pressure after recent earnings misses from Alphabet, ServiceNow, and Fortinet.