Microsoft exceeded analysts’ expectations in its fiscal first-quarter financial results, with revenue and profits surpassing estimates. Azure, the company’s cloud platform, showed significant growth with a 40% increase in revenue.

Despite the positive earnings report, Microsoft faced challenges due to a widespread cloud outage that affected various services throughout the day.

The tech giant’s capital expenditures soared to a record $34.9 billion, indicating a substantial investment in expanding its cloud infrastructure to meet the rising demand for artificial intelligence. This marked a significant increase from the previous quarter’s $24.2 billion. Microsoft had originally projected capital spending to exceed $30 billion for the first quarter.

Amid the infrastructure expansion, Microsoft addressed investor concerns about a potential artificial intelligence bubble by highlighting its commercial remaining performance obligation (RPO), which represents future contracted revenue. The RPO backlog grew by 51% year-over-year to $392 billion.

For the first time, Microsoft revealed that the RPO has an average duration of approximately two years, emphasizing the company’s long-term customer demand and justifying its significant capital spending.

Revenue for the quarter ending on September 30 reached $77.7 billion, marking an 18% increase from the previous year and surpassing analysts’ average expectations of $75.39 billion. The growth was primarily driven by strong demand for cloud and AI services.

The company reported profits of $27.7 billion, equivalent to $3.72 per share, exceeding the projected $3.66 per share.

Earlier on the same day, an Azure cloud services outage disrupted operations for various customers, including Alaska Airlines, Xbox users, and Microsoft 365 subscribers. Microsoft promptly addressed the issue by rolling back the faulty configuration, ensuring improvements for affected customers.

Following the financial results, Microsoft’s stock experienced a 3% decline in after-hours trading. Notably, the company’s market value reached $4 trillion following the announcement of a new OpenAI deal on the previous day.