Microsoft Azure tops $100B in annual revenue, record spend hurts cash flow
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Microsoft’s quarterly financials highlight how artificial intelligence is driving its cloud business. Azure grew 43% last quarter, pushing its annual revenue run-rate above $100 billion for the first time. Total company revenue for the quarter reached $90 billion, with net income at $35.8 billion.
The expansion comes at a cost. To fund AI infrastructure, capital expenditures hit a record $41 billion, and free cash flow fell 23% year-over-year even as profits rose. Microsoft 365 Copilot paid seats climbed to 30 million. Microsoft’s remaining performance obligation (RPO) increased to $678 billion; addressing investor concerns about dependence on a single customer, the company noted that most of the $51 billion quarterly increase came from customers other than OpenAI.
Buoyed by strong cloud and AI demand, shares rose more than 5% in after-hours trading. Meanwhile, Xbox content and services revenue declined 10% and hardware revenue fell 13%.