Microsoft reported stronger-than-expected results for the first quarter of fiscal year 2026, driven by accelerating demand for its cloud and AI services. Revenue rose 18% year over year to $77.7 billion, while operating income grew 24% to $38 billion.
Net income was $27.7 billion on a GAAP basis, up 12%, and $30.8 billion on a non-GAAP basis, up 22%.
Microsoft’s overall cloud revenue reached $49.1 billion, up 26%, with commercial remaining performance obligations (RPO) climbing 51% to $392 billion, nearly double over two years. Commercial bookings surged 112%, driven by large Azure contracts, including those with OpenAI.
“Our planet-scale cloud and AI factory, together with Copilots across high-value domains, is driving broad diffusion and real-world impact,” said Satya Nadella, chairman and CEO. “We continue to increase our investments in AI across both capital and talent to meet the massive opportunity ahead.”
Chief financial officer Amy Hood said the company “delivered a strong start to the fiscal year,” adding that Microsoft’s cloud business continues to show “growing customer demand for our differentiated platform.”
Cloud and AI Expansion
Intelligent Cloud revenue rose 28% to $30.9 billion, led by Azure and other cloud services, which grew 40% in constant currency.
Nadella said Azure “took share again this quarter,” noting that Microsoft now has “the most expansive data centre fleet for the AI era,” and plans to increase total AI capacity by over 80% this year and double its global data centre footprint over the next two years.
Microsoft announced a new long-term agreement with OpenAI, extending Azure’s exclusive rights until 2030 and model and product IP rights through 2032. Nadella called it “one of the most successful partnerships our industry has ever seen,” adding that OpenAI has now contracted an additional $250 billion of Azure services, not yet reflected in reported results.
Capital expenditures reached $34.9 billion, with roughly half allocated to short-lived assets such as GPUs and CPUs to expand Azure capacity. The company said 900 million users now use its AI features each month, with 150 million using first-party Copilots across products.
Adoption of Microsoft 365 Copilot continues to rise rapidly, with usage up 50% quarter over quarter, and more than 90% of the Fortune 500 now deploying it.
In software development, GitHub Copilot reached 26 million users, with over 180 million developers active on the platform. Nadella said GitHub is “adding a developer every second,” underscoring the momentum of AI-driven productivity tools.
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