Microsoft reveals strong cloud growth amid financial reporting overhaul

Tech News Microsoft Microsoft reveals strong cloud growth amid financial reporting overhaul Windows and Xbox revenues have declined during Microsoft’s first quarter of the 2027 financial year.

Windows and Xbox revenues have declined during Microsoft’s first quarter of the 2027 financial year.

Tom Warren Oct 28, 2026, 8:20 PM UTC Link Share Gift Image: Cath Virginia / The Verge Part Of Fall 2026 earnings watch see all Tom Warren is a senior correspondent and author of Notepad , who has been covering all things Microsoft, PC, and tech for over 20 years. Microsoft just posted the first quarter of its 2027 fiscal financial results. The software maker made $92.3 billion in revenue and a net income of $33.6 billion during Q1. Revenue is up 19 percent, and net income has increased by 32 percent.

It’s a new financial year for Microsoft, so the company is changing up how it reports its finances by splitting its businesses into two segments for the first time. Gone are the previous segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. It’s now just Agents and Infra, and Devices and Consumer.

Agents and Infra, which includes businesses like Azure, Microsoft 365 commercial and consumer, and server products, makes up 83 percent ($76.8 billion) of the overall $92.3 billion of Microsoft’s revenue and has increased 25 percent year-over-year. The big changes to Microsoft’s financial reporting also mean we will now see the company disclose Azure revenue on a quarterly basis. Azure contributed $33.17 billion in revenue this quarter, up 48 percent year-over-year.

Devices and Consumer, which includes Windows, Xbox, Surface, and Microsoft’s search and advertising businesses, makes up the remaining 17 percent ($15.5 billion) of Microsoft’s $92.3 billion in revenues this quarter — a decrease of three percent.

Windows OEM and devices revenue is down 22 percent year-over-year, amid a RAMageddon crisis that has seen the overall PC market dropped by 20 percent in the recent quarter. Microsoft blames the revenue drop on the benefit of Windows 10 end of support during the prior year, as well as OEM inventory drawdowns and a weaker PC market.

Microsoft launched Intel- and Qualcomm-powered Surface Pro 12 and Surface Laptop 8 devices just before its new financial year began, and the company even refreshed its smaller Surface Pro and Surface Laptop with Qualcomm’s X2 Plus chips during the quarter. Surface prices are higher than ever thanks to RAMageddon , and the PC market looks like it’s going to go through a very tough time during Microsoft’s 2027 financial year and beyond.

Over on the Xbox side, hardware revenue has declined once again year-over-year. Xbox hardware revenue is down 14 percent. Xbox content and services, which includes Game Pass, is down 2 percent, too. Microsoft is still not giving an update on Game Pass subscriber numbers, after the company last reported it had 34 million subscribers more than two years ago.

The first quarter of the 2027 financial year for Xbox has been dominated by a “reset” with thousands of layoffs and studios spun off. The layoffs aren’t over yet, with rumors more could arrive in November and January. In a memo earlier this year, Xbox CEO Asha Sharma said “we will return Xbox to player and revenue growth” by the end of fiscal year 2027 (which runs through next June).

The aim, as Sharma puts it, is to “scale what works” so that by fiscal year 2030 Xbox is “halfway to our long-term daily-player goal with sustained double-digit growth in players and engagement and industry leading margins.”

Microsoft’s cloud revenues were really the star of the earnings show again this quarter, a phrase I seem to always write every few months. Microsoft Cloud revenue contributed $63.9 billion towards Microsoft’s revenues this quarter, almost 70 percent. That’s up 30 percent year-over-year, thanks to strong demand for Azure and Microsoft 365 commercial cloud.

Microsoft 365 commercial cloud revenue itself also grew 18 percent, thanks to higher revenue per user and upselling of premium options like Microsoft 365 Copilot, E5, and E7. Microsoft 365 consumer cloud revenue has also grown by 17 percent, driven by growth in revenue per user and subscriber growth of 7 percent.

Microsoft will now hold an earnings call at 2:30PM PT / 5:30PM ET, and we’ll update this article with any relevant information.

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Fuente: The Verge