Microsoft Corporation's ( MSFT ) booming AI business is stretching its cloud infrastructure to the limit, with CFO Amy Hood acknowledging that Azure's capacity shortfall likely capped revenue growth in the latest quarter.

Azure Capacity Crunch Hits Growth

During the company's fiscal first-quarter earnings call on Wednesday, Deutsche Bank analyst Brad Zelnick asked whether Microsoft ( MSFT ) could quantify the "revenue impact of Azure being short on capacity."

In response, Hood said that Microsoft ( MSFT ) has been short in Azure due to surging AI demand across its ecosystem — from Microsoft ( MSFT ) 365 Copilot and GitHub to its expanding security portfolio.

"It's always hard to quantify precisely what would have been the revenue impact in the quarter," adding, "But I would offer a way to think about it is Azure probably does bear most of the revenue impact."

"It is safe to say that the number could be higher," she said, referring to the revenue impact.

The executive noted that Microsoft ( MSFT ) has prioritized allocating resources to its fast-growing AI-driven products first, including Copilot and GitHub, as adoption and usage surge.

"We’ve seen very different patterns, which we’re encouraged by. It’s the adoption of security features. It’s the GitHub momentum. When you’re thinking about it, that is where, and it is a priority for us, to allocate resourcing there first," she said.

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Balancing Demand And AI Priorities

Hood also added that the company has made it a priority to ensure its product teams and AI researchers have access to computing power, even as demand outpaces supply. 

"We’ve worked very hard to try to mitigate it as best we can, but we have been short in Azure."

Microsoft Beats Estimates With $77.7 Billion In Q1 Revenue

Microsoft ( MSFT ) posted first-quarter revenue of $77.7 billion, marking an 18% year-over-year increase and surpassing the Street consensus estimate of $75.3 billion.

Revenue from Azure and other cloud services climbed 40% compared to the same period last year.

For the second quarter of fiscal 2026, Microsoft ( MSFT ) expects revenue between $79.5 billion and $80.6 billion, reflecting 14% to 16% growth.

The company also anticipates ongoing commercial cloud gross margin pressure, elevated capital expenditures and capacity constraints continuing through the end of the fiscal year.

Price Action: According to Benzinga Pro data, Microsoft ( MSFT ) shares fell 3.98% in after-hours trading, slipping to $519.99.

Benzinga's Edge Stock Rankings position Microsoft ( MSFT ) in the 97th percentile for Growth, highlighting its robust long-term fundamentals and strong investor confidence. Click here to see how it stacks up against its peers.

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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.