Investing.com -- Microsoft (NASDAQ: MSFT) on Wednesday reported quarterly revenue growth that surpassed analyst expectations, as the company’s substantial investments in artificial intelligence infrastructure yielded returns amid strong demand for cloud services and AI.

The company reported first-quarter revenue of $82.9 billion, well above the consensus estimate of $81.29 billion. However, the stock declined about 2% in early premarket trade Thursday.

The company said revenue at its Azure cloud-computing unit increased 40% in the January-March quarter, meeting the consensus estimate of 40% from research firm Visible Alpha.

Microsoft Cloud revenue was $54.5 billion, up 29% (up 25% in constant currency), it said.

"The quarter’s reported growth suggests the spending is still translating into cloud demand rather than just margin drag," Emarketer analyst Gadjo Sevilla said.

The results may ease worries that sluggish Copilot 365 adoption and heavy reliance on OpenAI have weakened Microsoft’s early AI lead. They also support ongoing data-center investments, which have strained cash flows, as cloud providers are projected to spend over $600 billion on AI infrastructure this year.

"This quarter should provide some reassurance to investors and a bit of a sentiment reprieve, but does not solve the longer-term issues of OpenAI exposure, rising capex costs, and uncertainty around the Azure capacity/demand breakeven timeline," Raymond James analyst Andrew Marok said.

Capital expenditure rose 49% to $31.9 billion in the company’s fiscal third quarter, the company said on Wednesday. Spending had totaled $37.5 billion in the second quarter.

“We are focused on delivering cloud and AI infrastructure and solutions that empower every business to eval-max their outcomes in the agentic computing era,” said Satya Nadella, chairman and chief executive officer of Microsoft. “Our AI business surpassed an annual revenue run rate of $37 billion, up 123% year-over-year.”

Th technology giant reported diluted earnings per share of $4.27 in the January-March quarter, $0.22 better than the analyst estimate of $4.05

The performance may also support the company’s data-center spending, which has affected cash flows, as major cloud providers are expected to spend more than $600 billion on AI infrastructure this year.

Microsoft has added Anthropic’s technology to its cloud services and products, such as Copilot, as demand for the Claude creator’s models has increased.

Earlier this week, Microsoft restructured its OpenAI agreement to secure its 20% share of the startup’s revenue through 2030, regardless of technological developments.