Microsoft Reports $92.3 Billion Quarter as Azure Jumps 48 Percent

Microsoft posted $92.3 billion in revenue and $33.6 billion in net income for the first quarter of its 2027 fiscal year. Revenue rose 19 percent year over year. Net income climbed 32 percent.

The company reported the quarter under a completely new structure. It abandoned its three former segments — Productivity and Business Processes, Intelligent Cloud, and More Personal Computing — and split the business into two reporting units: Agents and Infra, and Devices and Consumer.

How big is the cloud business now?

Agents and Infra, which houses Azure, Microsoft 365 commercial and consumer, and server products, generated $76.8 billion. That is 83 percent of total revenue. The segment grew 25 percent year over year.

The reporting change also brings a new disclosure: Microsoft will now report Azure revenue every quarter. Azure contributed $33.17 billion this quarter, up 48 percent year over year.

Microsoft Cloud revenue overall reached $63.9 billion, nearly 70 percent of the company's total. Cloud remained the clear driver of the quarter's results.

What happened to Windows and devices?

Devices and Consumer, which covers Windows, Xbox, Surface, and search and advertising, brought in the remaining $15.5 billion, or 17 percent of revenue. The segment fell 3 percent year over year.

Windows OEM and devices revenue dropped 22 percent. The decline landed amid an ongoing RAM supply crisis that shrank the overall PC market by 20 percent in the recent quarter. Microsoft attributed the fall to three factors:

• The prior-year benefit from Windows 10 end of support
• OEM inventory drawdowns
• A weaker PC market

The hardware pipeline stayed busy despite the slump. Microsoft launched Intel- and Qualcomm-powered Surface Pro 12 and Surface Laptop 8 devices just before the fiscal year began. During the quarter it refreshed the smaller Surface Pro and Surface Laptop with Qualcomm's X2 Plus chips.

Higher memory prices pushed Surface prices to record levels. The PC market faces a difficult stretch across the 2027 fiscal year and beyond, according to the company's own outlook framing.

What is the state of Xbox?

Xbox hardware revenue fell 14 percent year over year. Xbox content and services, which includes Game Pass, declined 2 percent. Microsoft again declined to update Game Pass subscriber counts. The company last reported 34 million subscribers more than two years ago.

The quarter marked what the company calls a reset for the gaming division. Thousands of employees were laid off and several studios were spun off. Reports suggest further layoffs could arrive in November and January.

Xbox CEO Asha Sharma set the turnaround target in a memo earlier this year: "we will return Xbox to player and revenue growth" by the end of fiscal year 2027, which runs through next June.

Sharma described the longer-term aim as an effort to "scale what works." By fiscal year 2030, she wrote, Xbox should be "halfway to our long-term daily-player goal with sustained double-digit growth in players and engagement and industry leading margins."

What does the new reporting structure signal?

The two-segment split makes the imbalance explicit. More than four of every five revenue dollars now come from cloud, software agents and infrastructure. The consumer hardware business, once the public face of Microsoft, accounts for less than a fifth.

Quarterly Azure disclosure raises the competitive stakes. Rivals and analysts will now track the cloud unit's growth rate against Amazon and Google on a like-for-like cadence each quarter.

The memory cost crunch adds pressure on the consumer side. Higher RAM prices lift Surface bill of materials while PC demand contracts, squeezing a segment already in decline.

With Azure compounding near 50 percent and Xbox committed to a growth deadline of June, the fiscal year ahead will test whether the cloud engine can keep carrying a shrinking devices business.