Automatic translation: Originally published in Danish 28/10/2026, 20:10 GMT. Give feedback here.
Red Flag · First read on the financial statements · AI-generated content · the share is already trading
HCA Red Flag: Microsoft Azure grows 48%, faster than analysts expected (AI)
Microsoft (MSFT) · Q1 2026/27 · October 28
The share is up 35% over 3 months, 2% below its record closing price
| Overall assessment | Positive assessment |
| Positive view | Balanced | Negative view |
The share is trading 4.5% higher in after-hours trading at 9:05 PM CET; the likely reason is that Azure, Microsoft's cloud platform, grew 48% vs. the expected 44.3%. Free cash flow – meaning cash after investments – fell 27% to 18.6 BUSD, and this evening's earnings call regarding investments could still turn sentiment.
Red flags in the financial statements
Free cash flow falls 27% while investments double
Actual 18.6 BUSD · Previous year 25.7 BUSD
Payments for servers and data centers for Azure rose 103% to 39.4 BUSD, while operating cash flows increased 29%. If the earnings call raises the investment plan, free cash flow estimates will fall again.
Order backlog flat at 677 BUSD
Now: 677 BUSD · Previous quarter: 678 BUSD
The order backlog – contracted revenue not yet recognized – was, according to Microsoft, supported by one large new Azure deal, while order intake fell 12% vs. last year's large OpenAI contracts. Visibility into cloud growth thus relies on a few very large customers.
Microsoft 365 license growth slows to 5%
Actual 5% · Previous quarter 7%
The number of paid licenses among enterprise customers grew 5%, so growth now relies on higher prices per user from Copilot, the company's AI assistant, and the E7 bundle. Revenue per user must continue to rise to maintain 18% growth.
Green flags in the financial statements
Azure accelerates to 48% vs. the expected 44.3%
Actual 48% · Est. 44.3%
Azure, Microsoft's cloud platform, beat the top of the company's own guidance by 3 percentage points and the 47% that Morgan Stanley estimated investors were expecting by 1 percentage point. Estimates for next year's cloud revenue must be revised upward.
Operating margin rises to 50%
Actual 49.8% · Guidance: unchanged at 48.9%
Operating expenses of 16.6 BUSD were below the guidance of 16.8 to 16.9 BUSD, and the gross margin in Microsoft Cloud rose to 66% from 65%. Earnings estimates are therefore rising in line with sales.
Capital expenditures come in below guidance
Actual 45.2 BUSD · Guidance: over 50 BUSD
Capital expenditures including leased data centers rose 30% to 45.2 BUSD, below Microsoft's own guidance, even though Azure beat expectations. This dampens April's fear that investments are outpacing sales, unless the call shows that they have merely been postponed.
Disclaimer: This is an HCA AI-generated research commentary based solely on the company's published financial statements. The commentary does not constitute investment consulting and should not be used as the sole basis for investment decisions. Investing in shares involves the risk of loss. Seek professional consulting. /HC Andersen Capital, 9:08 PM, October 28, 2026