Microsoft shares rose 4% in extended trading on Wednesday after the company reported better-than-expected quarterly results, driven by 48% growth in its Azure cloud infrastructure business.

Here's how the company fared relative to LSEG consensus:

• Earnings per share: $4.89 adjusted vs. $4.73 expected
• Revenue: $92.28 billion vs. $90.69 billion expected

Microsoft's revenue grew 19% year over year in the quarter, which ended on Sept. 30, according to a statement, with Azure now its biggest single business.

The software giant has been rapidly building out data center infrastructure to meet artificial intelligence demand, while also maintaining positive free cash flow unlike its fellow hyperscalers. Microsoft reported $45.2 billion worth of capital expenditures and finance leases during the quarter, up about 30% from a year earlier. Analysts surveyed by StreetAccount had projected $50.67 billion.

Free cash flow declined 27% to $18.63 billion. Cloud rival Alphabet reported more than $9 billion in negative free cash flow in the quarter after Meta said last week its cash flow turned negative for the first time.

Microsoft's net income increased to $36.63 billion, or $4.92 per share, from $27.75 billion, or $3.72 per share, a year ago. Adjusted earnings exclude a roughly $200 million impact from its investment in OpenAI.

For the first time, Microsoft disclosed revenue from its Azure cloud in dollars, at $33.17 billion in the quarter. Analysts polled by StreetAccount expected $32.32 billion. The growth rate in the June quarter was 42%.

Microsoft reported results under two operating segments — Agents and Infra, and Devices and Consumer. For the past 11 years, the company had three segments that divided up its Azure, Office and Windows businesses.

In Agents and Infra, revenue rose almost 25% to $76.8 billion, more than the $75.63 billion consensus among analysts polled by StreetAccount. The segment contains Azure, along with Microsoft 365 cloud products, productivity and server licensing, industry solutions and frontier and support services.

Revenue in the Devices and Consumer business slipped 3% to $15.48 billion, beating the StreetAccount consensus of $15.05 billion. The unit includes search and advertising, Xbox, devices and Windows operating system licenses sold to device makers.

Sales of devices and Windows licenses declined 22%, as higher memory and storage costs elevated prices.

As of Wednesday's close, Microsoft shares were up about 10% year to date, trailing the S&P 500 index, which has gained 13% over the same period.

During the fiscal first quarter, Microsoft said it would cut 4,800 jobs, and followed up by announcing on Monday that it's offering buyouts to up to 60,000 employees, as it strives to balance a costly AI build-out with capital efficiency. Microsoft also established, during the quarter, an AI implementation unit and revealed a Copilot AI "super app" with coding abilities.

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