San Francisco Frontiers - Microsoft beats expectations fueled by Azure cloud business

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

The technology giant recorded $92.3 billion in total revenue and more than $36.6 billion in profit, the company said in a securities filing Wednesday.

Analysts had expected around $90.6 billion in revenue and $35.1 billion in profit, according to FactSet.

The quarterly earnings report comes just days after Microsoft offered voluntary buyouts to about 60,000 employees, roughly a quarter of its workforce, as the tech giant spends heavily on artificial intelligence investments.

It's the second voluntary buyout offer that Microsoft has offered employees this year, after giving seven percent of its US workforce the option to retire early in April.

Microsoft had 223,000 employees globally at the end of June, down from 228,000 at the end of 2025, according to regulatory filings.

Earlier this month, Microsoft also announced a new Surface Ultra laptop that runs on Nvidia's artificial intelligence chips and will cost more than $2,500.

The launch is part of a broader push by tech companies to release hardware that can handle more AI computing on-device and offline, so users do not have to rely solely on remote cloud data centers, where running AI is slower and more expensive.

- AI spending -

One of the big questions looming over tech earnings is whether the industry's heavy AI spending is paying off.

Analysts are expecting $51 billion in overall spending by Microsoft from July to September, according to FactSet.

Microsoft nearly doubled its spending on "property and equipment" to $39 billion compared to the same period last year, according to a press release.

The company added 24 new data centers across the world last quarter, Nadella said on a call with analysts Wednesday afternoon.

Its overall capital expenditures reached $45.2 billion, around three-quarters of which was spent on "short-lived assets" like memory chips and storage, Chief Financial Officer Amy Hood said.

In the final quarter of 2026, Microsoft expects capital expenditures to reach more $50 billion, which will bring its total spending for the year to $170 billion, she said.

Microsoft competes with Amazon Web Services (AWS) and Google parent Alphabet for cloud computing services customers.

AWS has dominated the sector and remained number one globally by revenue in the second quarter of the year, according to Synergy Research Group.

Microsoft is number two globally, followed by Google.

However, Google on Wednesday reported that revenue from its cloud division doubled to $30.7 billion during the quarter, bringing it closer to Microsoft's Azure revenue, which reached $33.2 billion in the same period.

Tech companies are expected to collectively spend hundreds of billions of dollars on AI-related expenses this year.

Tech giants have also been taking on debt to fuel AI growth.

"To complement cash generated by the business and preserve financial flexibility, we will access additional sources of funding when we believe it is attractive to do so," Hood said.

Alphabet recently raised $85 billion through equity offerings to fund its AI data center expansion.

On Monday, Facebook parent company Meta said it would raise $35 billion through a stock offering to fund its own AI investments.

That stock offering is also a sort of financial carrot intended to keep CEO Mark Zuckerberg in California, where voters in November will decide whether to approve a temporary tax on wealth held by billionaires who reside in the state.

Amazon reports its quarterly earnings on Thursday.

P.Thomas--SFF