23 Daily — According to theverge.com, Microsoft announced its fiscal first-quarter results for 2027 on October 28, 2026, reporting revenue of $92.3 billion and a net income of $33.6 billion, marking year-over-year increases of 19% and 32%, respectively. The company also restructured its reporting segments for the first time, dividing its business into two segments: Agents and Infra, and Devices and Consumer, highlighting the strong performance of its cloud services.

Microsoft restructures reporting segments to emphasize cloud growth

Microsoft discontinued its previous three reporting segments—Productivity and Business Processes, Intelligent Cloud, and More Personal Computing—in favor of two segments: Agents and Infra, and Devices and Consumer. The Agents and Infra segment includes Azure, commercial and consumer Microsoft 365, and server products. This segment generated $76.8 billion in revenue, accounting for 83% of total revenue, and grew 25% year-over-year. Notably, Azure revenue was disclosed quarterly for the first time, totaling $33.17 billion this quarter, up 48% compared to last year.

Device and consumer revenue declines amid tough market conditions

The Devices and Consumer segment comprises Windows, Xbox, Surface, and Microsoft's search and advertising businesses, making up 17% of total revenue (

5.5 billion), down 3% year-over-year. Windows OEM and device revenue dropped 22%, impacted by a 20% decline in the overall PC market and the prior year's end of support for Windows 10. Despite releasing Intel- and Qualcomm-powered Surface Pro 12 and Surface Laptop 8 just before the financial year, along with refreshed smaller Surface devices with Qualcomm's X2 Plus chips, prices increased due to memory shortages dubbed 'RAMageddon.' The PC market is facing continued challenges throughout Microsoft's 2027 fiscal year. Xbox hardware revenue fell 14%, while Xbox content and services, including Game Pass, decreased 2%. Microsoft has not updated Game Pass subscriber numbers since reporting 34 million subscribers over two years ago.

Xbox reset plan alongside sustained cloud revenue growth

Xbox experienced organizational restructuring this quarter, including significant layoffs and studio spinoffs, with rumors of further layoffs in November and January. Xbox CEO Asha Sharma stated plans to return Xbox to player and revenue growth by the end of fiscal year 2027, aiming to reach half of their long-term daily-player goal by fiscal year 2030, alongside double-digit growth and industry-leading margins. Meanwhile, Microsoft Cloud continued to perform strongly, contributing $63.9 billion, or nearly 70% of total revenues—growing 30% year-over-year. Microsoft 365 commercial cloud revenue grew 18%, and consumer cloud revenue expanded 17%, driven by higher revenue per user and upselling premium options like Microsoft 365 Copilot, E5, and E7.

Editor's take: Cloud business as Microsoft's revenue backbone offers opportunities for startups

Microsoft's financial results underscore cloud services as its most robust and growing segment, with Azure and Microsoft 365 driving revenue growth. Startups should consider opportunities arising from expanding enterprise cloud demand, such as providing complementary tools, value-added services, or integration solutions. In contrast, traditional hardware and consumer segments show vulnerability to market fluctuations. To validate Microsoft's cloud growth trends, tracking quarterly Azure revenue, monitoring Microsoft 365 user and revenue metrics, and analyzing industry reports on enterprise cloud adoption provide actionable insight. These data points can guide entrepreneurs in assessing the timing and direction for entering the cloud ecosystem.