Update, 10/28: Microsoft’s Azure cloud business brought in $33.2 billion in revenue in the September quarter, up 48% from a year earlier, blowing past the company’s own forecast and beating Wall Street’s expectations. Read the full story.

---

Microsoft’s earnings report Wednesday will come two days after the company offered buyouts to about 60,000 people, roughly a quarter of its employees. The call gives executives their first chance to say what the offer will cost, and to explain how it fits with the company’s long-term view of its workforce.

Whether or not they go into those details, it’s one of several issues to watch in Wednesday’s report, the first under Microsoft’s new reporting structure. Anthropic’s IPO filing on Monday adds another storyline, showing how much the Claude maker has agreed to spend on Microsoft’s cloud.

Coming into the report, Microsoft’s stock is near its high. Microsoft closed Monday at $532.60, about 2% below its record close of $543.45 on Oct. 13, after gaining roughly $1.4 trillion in market value since late June.

Here are the key numbers and issues heading into Microsoft’s results for the first quarter of its 2027 fiscal year, ended Sept. 30.

Core numbers: Analysts expect revenue of $90.75 billion, up nearly 17% from a year ago, and earnings of $4.72 per share, up 14%, according to Yahoo Finance. Microsoft’s own forecast was $89.85 billion to $90.95 billion, so Wall Street is looking for a result near the top of that range.

In July, Microsoft reported $90 billion in revenue for the June quarter, well above the $87.7 billion analysts expected.

A new scorecard: Microsoft announced in September that it would sort its business into two groups instead of the three it had used since 2015. This is the first quarter under the new setup.

The first, dubbed Agents and Infra, includes Azure, Microsoft 365, Dynamics, LinkedIn’s recruiting and sales tools, and server and productivity licensing. It brought in 81% of Microsoft’s revenue and 88% of its operating income in fiscal 2026, based on figures Microsoft recast under the new structure.

Microsoft expects Agents and Infra revenue of $75.15 billion to $75.75 billion this quarter, which would be growth of about 22% to 23%, by GeekWire’s calculation.

The other group, Devices and Consumer, includes Windows, Xbox and search advertising. Microsoft expects it to bring in $14.7 billion to $15.2 billion, down 5% to 8% from a year earlier.

Azure, in dollars: Microsoft started disclosing Azure’s annual revenue last year, when it passed $75 billion, and topped $100 billion in fiscal 2026. Starting this quarter, it reports the figure every quarter. It also changed what counts as Azure: GitHub’s cloud business and Security Copilot now fall under Microsoft 365, and its healthcare cloud moved to a new industry unit.

Counted that way, Azure brought in $29.4 billion in the June quarter, up 42%. Microsoft expects growth of 44% to 45% this quarter, not counting currency fluctuations, which would put Azure at roughly $32 billion, by GeekWire’s calculation. That compares with the roughly 45% Microsoft projected in July, under the old definition.

Hitting that forecast may not be enough. Investors are looking for about 46%, BNP Paribas analyst Stefan Slowinski wrote in a note Monday. In January, Azure beat Microsoft’s own forecast and the stock still fell 10%, because investors had privately expected more.

“Azure moves the stock, but the read that matters is whether capacity is absorbed as fast as it lands,” wrote Dan Ives of Yorkville Ives in a note last week.

Capital spending: Microsoft expects capital expenditures of more than $50 billion for the quarter, which would be a record. That’s up from $41 billion in the June quarter and $34.9 billion a year earlier.

An accounting change reduces what Microsoft reports as capital spending, without reducing its planned investment. Microsoft now assumes its data center buildings will last 25 years instead of 15. As a result, more of its data center leases will be classified in a way that doesn’t count as capital spending, CFO Amy Hood said on the July earnings call.

That change alone lowered Microsoft’s capital spending estimate for calendar 2026 to about $175 billion, from the roughly $190 billion it projected in April. Hood said the company’s actual spending plans hadn’t changed.

Cloud margins: Microsoft Cloud gross margin came in at 65% last quarter, better than expected but down from a year earlier. Microsoft said it expects the figure to be relatively stable this quarter. It also expects operating margins to be roughly flat with a year ago.

Workforce: The new “voluntary exit” offer, announced Monday by Chief People Officer Amy Coleman, covers participating teams in the U.S., Canada, the U.K. and India. It has no age or tenure requirement and extends to some vice presidents. Employees have until the first week of December to decide, and Microsoft hasn’t said how much the offer will cost or when it will record the charge.

For the spring retirement program, Hood disclosed the cost on the April earnings call: about $900 million, with roughly $350 million in cost of revenue and $550 million in operating expenses. The charge showed up in the following quarter. About 30% of the 8,750 eligible employees accepted.

The new offer is less generous. It matches Microsoft’s standard severance, without the extended healthcare of the spring program, and the company expects a much smaller share of people to take it. But the pool of eligible employees is nearly seven times larger.

Microsoft says the offer doesn’t mean it needs fewer people. Coleman said in July that the company was studying whether to make voluntary exits a regular part of managing its workforce. It has told investors to expect operating margins roughly flat this quarter and down less than a point for the full fiscal year, even with record capital spending.

Nadella has addressed this before. In a July 2025 memo to employees, after Microsoft laid off about 15,000 people, he acknowledged the “uncertainty and seeming incongruence” of thriving financially while cutting jobs. “This is the enigma of success in an industry that has no franchise value,” he wrote.

In his annual shareholder letter last week, he focused on Microsoft’s spending on AI infrastructure. “Based on the demand we see and the efficiencies we are driving, I am confident in the long-term returns on our investments,” Nadella wrote. “We are building against a growing book of business tied to this secular shift.”

Microsoft had about 223,000 employees as of June 30, before it cut 4,800 jobs in July and more in September. The Information reported this month that Azure President Girish Bablani told leaders in his group to find ways to cut costs by at least 20%. Microsoft called the report inaccurate and said Azure leadership had not directed teams to develop cost-cutting plans.

Copilot: Microsoft said in July that businesses were paying for more than 30 million Microsoft 365 Copilot seats, up from 20 million in April. That’s still only about 7% of the more than 450 million commercial Microsoft 365 seats.

The bigger change is in how Microsoft charges for Copilot and its other AI tools. In July it added usage-based billing alongside per-seat pricing. It’s also pushing customers toward E7, a new premium bundle that includes Copilot. Microsoft expects Microsoft 365 commercial cloud revenue to grow about 17% this quarter, not counting currency swings, a number that now includes GitHub.

The BNP Paribas analyst Slowinski, who attended Microsoft’s Frontier Tour event in London last week, wrote that partners are seeing more customers roll out Copilot company-wide. Partners also told him that Microsoft now ties 35% of E7 sales incentives to how much customers use features like Cowork.

Anthropic and OpenAI: Anthropic’s S-1 filing shows the company has committed to spend at least $44.9 billion with Microsoft from November 2026 to May 2033, up from the $30 billion Azure commitment announced last November. That’s well below its minimum commitments to Amazon ($110 billion) and Google ($114.5 billion).

Microsoft agreed last year to invest up to $5 billion in Anthropic. Its results for the June quarter included a $3.2 billion gain on that investment.

OpenAI remains the bigger factor. Microsoft’s commercial remaining performance obligation (RPO), the measure of signed contracts it hasn’t yet delivered on, reached $678 billion last quarter, up 84% from a year earlier. Without OpenAI, the backlog grew 25%. OpenAI told investors its annualized revenue approached $50 billion at the end of September, The Information reported, lower than earlier reports of about $70 billion.

Windows: Microsoft expects revenue from Windows licenses sold to PC makers, along with its own devices, to fall a little more than 20%. Higher memory prices are making PCs more expensive, and PC makers are still working through extra inventory.

What’s next: Alphabet also reports Wednesday afternoon, and Amazon reports Thursday, setting up a side-by-side look at Azure, Google Cloud and AWS.

Anthropic is aiming to go public the week of Nov. 16, according to the Wall Street Journal.

Check back Wednesday afternoon for coverage.

Microsoft is winding down The Garage as a companywide program, ending a 17-year run for the effort that gave employees space and tools for side projects and ran the company’s Global Hackathon, according to an internal FAQ viewed by GeekWire.

The program, with a flagship location on Microsoft’s Redmond campus and more than a dozen other sites from Vancouver, B.C., to Beijing, became part of the company’s push for a more experimental culture under Satya Nadella, who took over as CEO in 2014.

In the FAQ, Microsoft says the experimentation that started in dedicated programs and spaces like The Garage now happens “every day within each of our teams,” as employees build new skills and adopt new tools in their regular work. The FAQ says the company is “reinventing how we foster innovation, learning, and experimentation” across Microsoft.

The move comes as Microsoft spends heavily on AI, much of it for data centers and other infrastructure, while cutting costs and jobs in other parts of the business.

“We regularly evaluate how we use our physical spaces to best support our employees, customers and partners,” a Microsoft spokesperson said in a statement. “As part of that ongoing work, we’re making changes to some Garage spaces. Innovation and a builder mindset remain central to how we work every day.”

The company declined to comment further, including on the effect on Garage employees.

The Garage will no longer operate “as a centralized function,” according to the FAQ, and the impact on each physical space “will vary by location.” Some Garage spaces could be restricted as early as Friday, Oct. 23. Neither the FAQ nor Microsoft’s statement says which spaces are affected, including the flagship location in Redmond. Employees can’t take equipment, tools or materials with them.

The future of the Global Hackathon is also unsettled. The FAQ says the hackathon team is “reimagining the program” and that Microsoft will have more to share later.

Microsoft’s public Garage website, which showcased hackathon projects and experimental apps, was redirecting to the Microsoft homepage as of Tuesday morning.

Other longtime fixtures of Microsoft’s campus have closed this year. The company shut down its campus libraries in Redmond, Hyderabad, Beijing and Dublin in January, describing the move as a shift to a “modern, AI-powered learning experience,” and closed its Visitor Center in Redmond’s Building 92 a month later.

From Office Labs to companywide: The Garage started in 2009 inside Microsoft’s Office Labs group in Redmond, with the slogan “Doers. Not Talkers.” The idea was to support employees who were already building their own projects, rather than collecting ideas and funding the most popular ones.

The program took on a bigger role under Nadella. In July 2014, The Garage ran Microsoft’s first companywide hackathon, which drew more than 11,000 registrants from 80 countries. The event became an annual fixture of Microsoft’s culture.

The Garage also released experimental apps to the public, including Mouse without Borders, a tool for controlling multiple PCs with one keyboard and mouse, and Arrow Launcher, which became Microsoft Launcher for Android.

As of this year, Microsoft listed Garage locations in 15 regions, including Redmond, Vancouver, B.C., the Bay Area, New York City, Ireland, Israel, India and Beijing.

Employee reaction: On Blind, the anonymous workplace app that verifies users’ employers, a post titled “Amy kills the Garage” drew more than 70 comments. The poster attributed the move to cost-cutting by Microsoft CFO Amy Hood.

Another employee wrote that The Garage was where they met their friends on campus and made connections that advanced their career.

“The Garage offices were one of the last few cool things about Microsoft,” one commenter wrote.