Microsoft’s Free Cash Flow Reaches $18.6 Billion as Azure Grows 48%
Key Facts
Microsoft’s free cash flow reached $18.6 billion in the first quarter of its fiscal 2027, compared with negative free cash flow of $2.12 billion at Meta in the third quarter of 2026. The companies reported the figures for different periods, putting AI infrastructure and data center spending at the center of the comparison. Microsoft said its $18.6 billion in free cash flow came alongside higher capital expenditures. Meta reported negative free cash flow of that amount in its results. The figures highlight the difference in the companies’ liquidity positions during the two periods, as Microsoft continues to fund a cloud expansion that it says is constrained by demand exceeding available capacity.
Microsoft reported revenue of $92.3 billion in the first quarter of its fiscal 2027, up 19% year over year. Cash flow from operations was $58 billion, up 29%, and the company said growth was driven by higher billings and collections in its cloud businesses. Microsoft Cloud revenue was about $63.9 billion, up 30% from the same period. Remaining commercial performance obligations also rose 73% to $677 billion. These indicators point to growth in cloud revenue and the scale of recorded obligations, while the spending needed to provide computing capacity remains a key factor in converting that demand into revenue.
Microsoft said Azure revenue rose 48% year over year in the first quarter, exceeding its expectations despite delays in some third-party capacity deliveries. The company attributed the growth to Foundry services and improved monetization of CPU usage. On its earnings call, it said, "Azure revenue exceeded expectations and grew 48%, driven by Foundry and improved monetization of CPUs, even as third-party capacity was delayed." It said about three-quarters of quarterly capital spending went to short-lived assets, particularly CPU and GPU units, alongside higher memory and storage costs. Allocating the largest share to these assets means spending is directly tied to expanding the computing capacity cloud services require.
Microsoft’s capital expenditures totaled $45.2 billion in the first quarter of its fiscal 2027. The company said some third-party capacity deliveries it had expected during the quarter were delayed; it did not provide a corresponding figure for market expectations in this statement. The delay puts the company’s explanation of actual spending in the context of limited capacity received, rather than an announced decline in demand. Microsoft said, "Some of the third-party capacity deliveries we expected in the first quarter were delayed." It added that customer demand for Azure continues to exceed available supply, linking the spending trajectory to delivery of the capacity needed to meet demand.
Microsoft expects Azure revenue to grow between 49% and 50% in constant currency in the second quarter of its fiscal 2027. It said improved efficiency across its CPU and GPU fleet will help offset some GPU-as-a-service contracts that were pushed into the second half of the fiscal year. It reiterated that "customer demand continues to exceed available capacity." For the company as a whole, it forecast revenue of between $96 billion and $97.1 billion in the second quarter. It also said capital spending would exceed $50 billion in the same quarter, reflecting continued investment in capacity while some delayed deliveries remain part of its expansion plans.
Microsoft estimated capital spending of about $170 billion during calendar year 2026 and said delays in third-party capacity deliveries explain the timing of some spending. It added that spending would accelerate in the second half as delayed CPU and GPU units are delivered. The forecast for spending to exceed $50 billion in the second quarter thus forms part of an annual trajectory the company said would approach $170 billion. In the November 11, 2026 session, Microsoft shares closed at $521.13 and Meta shares at $628.77, according to EL7 data. The closing prices provide a snapshot of the same session, while the cash-flow figures refer to Microsoft’s fiscal first quarter and Meta’s third quarter of 2026.