Microsoft beat Wall Street expectations on Wednesday, delivering financial results that showed steady demand even as problems with its Azure cloud computing platform ground websites and email accounts around the globe to a halt.
Azure outages began popping up Wednesday morning, hours before the Redmond-based software maker reported almost $77.7 billion in revenue for its first fiscal quarter of 2026, which ran from July through September. Analysts were expecting $75.3 billion in revenue. On top of that, the company brought in $27.7 billion in profit.
Despite a strong financial showing, Microsoft's stock price didn't recover from the slip caused by the Azure outage.
In a news release, Microsoft CEO Satya Nadella and CFO Amy Hood both chalked the results up to increased demand for the company's cloud services and its AI-powered Copilot models.
Our planet-scale cloud and AI factory, together with Copilots across high value domains, is driving broad diffusion and real-world impact," Nadella said. "It’s why we continue to increase our investments in AI across both capital and talent to meet the massive opportunity ahead."
The company's stock slid again in after-hours trading by almost 4% after statements by Hood that the company's forecast for spending in coming months will outpace what was previously expected.
Microsoft spent more than $88 billion in capital expenditures in its 2025 fiscal year, with almost all of it spent on building out its AI infrastructure. That included building data centers and purchasing expensive computer chips to meet AI demand. Hood had previously said that investments would cool off in 2026.
During a call with analysts on Wednesday, Hood said the demand for Microsoft cloud and AI services far exceeded the company's current capacity but she had thought Microsoft would be keeping up with demand.
"We are not, she said.
The company revealed $34.9 billion in capital expenditures between July and September, a record-setting quarterly figure for the company that's $10.2 billion more than in the quarter before. It was also almost $5 billion more than Microsoft estimated three months ago.
Hood said the company will increase spending each quarter and expects to invest more in the 2026 fiscal year than in 2025.
Microsoft's earnings came the day after the company and ChatGPT maker OpenAI announced that Microsoft would own 27% of OpenAI with a $135 billion stake. Under the terms of the deal, Microsoft has exclusive intellectual property rights with OpenAI until 2032, while OpenAI is purchasing $250 billion worth of Microsoft cloud computing services.
Microsoft also reported growth in its Azure cloud division, a figure the company kept hidden until its last quarter's earnings report in July. Azure's revenue increased by 40% during the first quarter compared to last year, though that may be overshadowed by a widespread Azure outage that affected much of the internet for most of the day.
The outage disrupted the websites of several companies and cut off access to Microsoft products like Xbox Live, Minecraft and Office 365. The company said in a status report that “customers may be experiencing issues accessing the portal,” which basically means they were hit with latency issues, webpage failures and inaccessible services.
Microsoft said midday Wednesday that it had rolled back most of the configuration that caused the issue and customers should expect to see improvements throughout the evening.
Locally, the outage caused headaches for Alaska Airlines for the second week in a row. The airline's website and mobile app were down, preventing some passengers from checking in to flights, but there was not a call for a ground stop.
Last week, Alaska grounded flights for eight hours after a failure at its primary data center.
A little over a week ago, Microsoft rival Amazon Web Services also reported an outage that affected multiple companies throughout the day on Oct. 20. The company said a bug in one of its systems caused a series of failures that ultimately kicked many companies offline.
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