According to a report published by China Merchants Securities International, Microsoft's revenue for the first fiscal quarter of fiscal year 2027 reached 92.3 billion US dollars, up 19% year on year, up 3% month on month, about 2% higher than market expectations; net profit of 36.6 billion US dollars, up 32% year on year, including OpenAI investment income of 207 million US dollars, compared with loss of 3.1 billion US dollars in the same period last year; operating profit margin reached 49.8%, up 0.9 percentage points year on year, mainly due to the release of operating leverage. Capital expenditure reached US$45.2 billion, up 10% from US$41 billion in the previous quarter, but about 11% lower than market expectations, mainly due to third party computing power and data center delivery delays. Management indicates that capital expenditure for the second quarter of FY2027 will exceed $50 billion and is expected to accelerate further in the second half of the year. Despite a 29% year-on-year increase in operating cash flow to $58 billion, free cash flow declined 27% year over year to $18.6 billion; the company expects to maintain positive free cash flow throughout the 2027 fiscal year. The bank maintains Microsoft's “plus” rating and target price of $640. It believes that Microsoft has leading AI commercialization capabilities, and that Azure's accelerated growth and continued positive free cash flow constitute an important advantage over peers.

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