Increased demand for cloud computing and AI services has propelled revenue growth of 18 percent to $77.7 billion for Microsoft for its fiscal Q1, ending September 30. Net income was $27.7 billion for the quarter, an increase of 12 percent year-over-year. “Our planet-scale cloud and AI factory, together with Copilots across high value domains, is driving broad diffusion and real-world impact,” said Microsoft chairman and CEO Satya Nadella, noting “It’s why we continue to increase our investments in AI across both capital and talent to meet the massive opportunity ahead.” The news coincides with OpenAI’s next steps in becoming a for-profit company and an update in Microsoft’s stake in the AI startup.

“Demand for the tech giant’s cloud services is so great that Microsoft will boost its AI capacity by more than 80 percent this year and double its total data-center footprint in the next two years,” writes The Wall Street Journal. “Microsoft now expects to spend more than previously projected on its AI infrastructure this fiscal year — and still be short of the capacity it will need to meet demand.”

Jonathan Neilson, VP of investor relations for Microsoft, told WSJ demand has been “healthy” across the entire portfolio, with cloud commitments from AI startup OpenAI a particular bright spot.

“On Tuesday, OpenAI announced that it had hammered out the details to convert into a for-profit entity, including a new agreement with Microsoft to restructure their relationship,” The New York Times reports, adding that under the new terms, “Microsoft will get a roughly $135 billion stake in OpenAI.”

The Wall Street Journal says that equates to a roughly 27 percent stake in the startup, an investment that pushes Microsoft to a valuation of more than $4 trillion.

OpenAI also “extended an agreement to give Microsoft unfettered access to all OpenAI technology that it could sell to customers and use in its own products until 2032,” NYT explains, further detailing an OpenAI commitment to purchase “$250 billion in computing power from Microsoft — more than three times Azure’s sales in Microsoft’s last fiscal year.”

Microsoft Cloud revenue grew 26 percent to $49.1 billion, and “commercial remaining performance obligation increased 51percent to $392 billion,” the company said in an earnings release.

Microsoft expects its Azure Cloud revenue to grow of 37 percent in fiscal Q2, reports Investor’s Business Daily, pointing out that despite the strong results, “Microsoft stock sank 3.7 percent to $521.72” in after-hours trading as investors grow skittish over capital expenditure increases.

“On Wednesday, the company reported spending a larger-than-expected $34.9 billion on new projects in the three months through September 30 as it races to build data centers that provide computing power to fuel the AI boom, a 74 percent increase from a year earlier,” NYT writes.

Related:
Meta, Google, and Microsoft Triple Down on AI Spending, Wired. 10/29/25
Microsoft Reports Strong Earnings as Azure Hit by Major Outage, The Guardian, 10/29/25
Microsoft’s Xbox Console Sales Fall 29% as Gaming Content and Services Revenue Ticks Up, Variety, 10/29/25