MSFT stock price today rises after Microsoft earnings beat Wall Street expectations, but is capex still a concern?

Microsoft stock rose over 2% in after-hours trading on Wednesday after the company reported fiscal first-quarter revenue and adjusted earnings as it topped Wall Street expectations. Azure's stronger than expected growth stood out while capital expenditure came in below what some investors had anticipated.

The company reported revenue at $92.28 billion and adjusted earnings per share of $4.89 for the quarter.

Amy Hood, Microsoft executive vice president and chief financial officer said, “Results exceeded expectations across revenue, operating income, and earnings per share.” Hood pointed out that, “We delivered a strong start to the fiscal year with Microsoft Cloud revenue of $63.9 billion, with growth accelerating to 30% (up 31% in constant currency) year-over-year."

MSFT Stock Gains as Azure Growth Beats Forecasts

Azure revenue grew 48%, exceeding the expected growth range of 44% to 45%. The performance was a key highlight of Microsoft's quarterly results.

Daniel Newman, CEO of Futurum, discussed the results in Yahoo Finance's earnings coverage, pointing to Azure as the standout figure. He said the growth reflected accelerating momentum in Microsoft's artificial intelligence offerings.

Microsoft's commercial backlog also drew attention. It remained flat quarter over quarter but increased approximately 73% year over year to around $677 billion, Newman said.

Microsoft Capex Comes in Below Expectations

Microsoft's capital expenditure reached $45.2 billion, including finance leases, coming in below expectations and prompting questions about the company's infrastructure spending.

Newman cautioned against reading too much into a single quarter. He pointed to factors such as data centers waiting to be energized and the timing of leases as possible reasons for fluctuations in spending.

He also said Microsoft's next-quarter guidance would be important in assessing the capital expenditure outlook. While investors are watching how much major technology companies spend on artificial intelligence infrastructure, a meaningful slowdown could also raise questions about expected returns on those investments.

Microsoft's AI Investment Remains in Focus

Newman described Microsoft's spending position as a “Goldilocks situation,” arguing that investors may be concerned about high infrastructure costs but could also react negatively if companies significantly slowed their investments.

He also highlighted Microsoft's approach to funding its expansion, saying the company had not raised debt or diluted shareholders to finance its infrastructure buildout. He contrasted this with other large cloud companies that have continued to borrow or raise equity.

Jesse Cohen, senior analyst at ‌Investing.com told Reuters, "Microsoft's first-quarter report was about as clean as it gets for a company this size," adding, "After Meta's and Alphabet's numbers revived AI-spending anxiety, this is the counterweight. Demand still exceeds supply, the commercial backlog is enormous, and returns are finally showing up in earnings and overall revenue."