Microsoft has posted a blockbuster quarter driven by the AI boom. CEO Satya Nadella said afterwards that he has never been more confident in the opportunity ahead.
Microsoft’s July-September revenue rose 19% year on year to $92.3 billion. Operating income grew 21% to $45.9 billion. Reported net income climbed 32% to $36.6 billion.
Cloud Growth Accelerates
Nadella described a fast start to the financial year in posts on X after the earnings call. Microsoft Cloud revenue reached $63.9 billion. Annual growth accelerated to 30%. Azure revenue grew 48%.
Azure’s growth spanned large companies, smaller businesses, cloud services and AI infrastructure, he said. Microsoft is adding computing capacity faster and getting more out of its existing infrastructure.
Copilot Gets Its Biggest Update
Nadella highlighted Microsoft’s biggest Copilot update yet. It combines Chat, Cowork, Autopilot and Code. Daily users rose nearly 50% over the previous quarter. They have grown more than fivefold from a year ago. User satisfaction improved by nearly 20% from the previous quarter and reached another record. The number of customers with more than 50,000 Copilot seats grew eightfold over the year.
He also pointed to GitHub Copilot Fusion, announced that morning. Nadella said it delivers leading quality at costs up to 77% lower. A comparison credited to Artificial Analysis put Fusion near 60 on its coding index. The average cost was roughly $5.50 per task. He said gains in intelligence per task must come with better cost and performance.
Microsoft is also bringing Dynamics 365 business capabilities directly into Copilot. The aim is to help organisations build their own software services.
Foundry, Fabric and Business Data
Foundry revenue more than tripled from a year ago. The number of customers building with multiple models grew fivefold. Revenue from open-source models rose tenfold. Microsoft is bringing Foundry and Fabric closer together, so customers can build agents near their data. Nearly 60,000 customers now access business information through Microsoft IQ, up 25% from the previous quarter.
Securing AI Agents
Nadella also described Microsoft’s work to control and secure AI agents. Agent 365 now manages more than 50 million agents, up 30% from the previous quarter.
Microsoft is combining Windows and Agent 365 so that agents can run within secure device boundaries. OpenAI Codex, Anthropic Claude Code and Meta Muse are adopting this approach. According to Nadella, Perception handles identity, permissions, monitoring and containment outside the AI model.
The Numbers Behind the Quarter
Microsoft Chief Financial Officer Amy Hood said results exceeded expectations. She said the company had a strong start to the fiscal year. Microsoft Cloud revenue came to $63.9 billion, with growth accelerating to 30%, or 31% in constant currency.
Hood said customer demand continues to exceed supply. Microsoft expects December-quarter revenue of between $96 billion and $97.1 billion. Devices and Consumer revenue fell 3% to $15.5 billion.
