• Microsoft’s first-quarter profits beat analyst estimates as cloud computing continued to grow.
• Capital spending in the first quarter reached $20 billion, up from $19 billion in the fourth quarter.
• Shares of Microsoft rose slightly after hours.

Microsoft reported better-than-expected first-quarter results after the closing bell Wednesday and continued to increase capital spending by investing in AI capabilities.

Investments totaled $20 billion, up from $19 billion in the fiscal fourth quarter and $14 billion in the previous quarter.

Much of the company’s spending has been on data centers, graphics processing units and other AI projects. By the end of the year, Microsoft intends to amass 1.8 million GPUs. By July 2025, the Redmond, Washington, company plans to triple the capacity of its data center. The company is trying to figure out how it will recoup this massive investment.

Also in the first quarter, Microsoft Cloud revenue increased 22% year-over-year to $38.9 billion. Analysts on average expected revenue of $38.11 billion, according to Bloomberg.

Shares rose more than 1% in late trading.

Some analysts have criticized the company artificial intelligence spendingas Business Insider previously reported.

“We are expanding our opportunities and gaining new customers by helping them apply our AI platforms and tools to drive new growth and operational leverage,” said the company’s chairman and CEO, Satya Nadella, in the announcement of the results.

The report follows that of Microsoft August announcement that it would reconfigure the way it reported the results of its business units. The Productivity and Business Processes segment includes results from Microsoft 365 Commercial products and cloud services.

Here are several key metrics for the quarter ended September 30 and how they compare to analysts’ consensus expectations as reported by Bloomberg.

• Earnings per share: $3.30 versus $3.11 expected
• Revenue: $65.59 billion versus $64.51 billion expected
• Operating profit: $30.6 billion versus $29.21 billion expected
• Microsoft Cloud revenue: $38.9 billion versus $38.11 billion expected

Investors have been tracking AI spending across many of the so-called Magnificant 7 stocks, of which Microsoft is one, alongside other tech giants including Apple, Amazon, Google parent Alphabet and Nvidia. One concern is that returns on business investments in AI might not meet expectations. That’s a concern at Microsoft, in part because feedback about the company’s performance Co-pilot AI was mixed.