Microsoft reported $92.3 billion in revenue and $33.6 billion in net income for the first quarter of its 2027 fiscal year, with revenue up 19 percent and net income up 32 percent. The results arrived alongside the company's first major change to how it reports its finances in years. Microsoft has split its businesses into two segments for the first time, replacing Productivity and Business Processes, Intelligent Cloud, and More Personal Computing with Agents and Infra, and Devices and Consumer.
Agents and Infra, which houses Azure, Microsoft 365 commercial and consumer, and server products, accounted for 83 percent of the quarter's revenue at $76.8 billion, up 25 percent year-over-year. The new structure also means Microsoft will now disclose Azure revenue every quarter. Azure brought in $33.17 billion this quarter, a 48 percent year-over-year increase. Microsoft Cloud revenue overall contributed $63.9 billion, nearly 70 percent of total revenue, up 30 percent on strong demand for Azure and Microsoft 365 commercial cloud.
Devices and Consumer, which includes Windows, Xbox, Surface, and Microsoft's search and advertising businesses, made up the remaining 17 percent at $15.5 billion, a decrease of three percent. Windows OEM and devices revenue fell 22 percent year-over-year. Microsoft attributed the drop to the prior year's benefit from Windows 10 end of support, OEM inventory drawdowns, and a weaker PC market, which overall declined by 20 percent in the recent quarter amid what the source described as a RAMageddon crisis. CFO Amy Hood said on the earnings call that she expects Windows OEM revenue to decline again next quarter, around the mid 30s, and to keep declining throughout the 2027 financial year.
CEO Satya Nadella used the earnings call to describe the company's hybrid AI push for Windows, saying Microsoft aims to bring hybrid intelligence to every desk in every home and make every PC a secure agent box. He said that as more capable models run locally, the company sees an opportunity to make more intelligence effectively unmetered. Microsoft and Nvidia unveiled RTX Spark laptops earlier this month, including the Surface Laptop Ultra, which ship with up to 128GB of unified memory and can run recent frontier models locally.
Xbox's quarter was dominated by a reset that included thousands of layoffs and studios spun off, and the layoffs are not over, with rumors of more in November and January. Xbox CEO Asha Sharma has said the company will return Xbox to player and revenue growth by the end of fiscal year 2027, and posted that Xbox was making progress with a lot more work ahead. She said PC platform revenue grew in double digits this quarter and that console sales remain constrained by supply, with more demand than consoles available. Hood said Xbox hardware revenue will decline again next quarter, while Xbox content and services revenue is expected to rise in the mid to high single digits.
Nadella also discussed Microsoft's first-party AI models on the call, saying the company's goal is to advance the cost to outcome frontier by delivering capabilities comparable to leading models within three to six months of their release at a fraction of the training cost, allowing it to pass those cost benefits to customers.
More software news from TechManNews.
