Microsoft Earnings Preview: Azure and AI

Microsoft Corp. (MSFT) will report fiscal third-quarter results for the period ended March 31 after the market close on April 29, 2026. Investors will focus on whether Azure sustains its growth and how elevated AI capital expenditures (CapEx) affect margins.

Q3 Expectations and AI Investment

Consensus estimates project revenue near $81.4 billion, a 16.0% increase year over year, with earnings per share between $4.04 and $4.07, up about 17.0%. Azure growth is expected to moderate slightly to roughly 37.0%–38.0% on a constant-currency basis, down from 38.0% in the prior quarter. Some analysts anticipate a pace closer to 39.0%. Intelligent Cloud revenue is forecast at about $34.3 billion, up 28.0%, making it the main driver of revenue growth.

In the prior quarter, Microsoft reported total revenue of $81.3 billion, with Intelligent Cloud contributing $32.9 billion, or 40.5% of the total. Operating income was $13.9 billion, about 36.2% of overall operating profit.

Capital spending accelerated to $37.5 billion in the previous quarter. Fiscal-year 2026 CapEx is running above $100 billion, modeled between $105 billion and $120 billion, with roughly two-thirds allocated to AI and cloud GPUs and related hardware. Contracted future revenue reached approximately $625 billion, more than doubling year over year. About 45.0% of that backlog is tied to OpenAI, while contracted revenue excluding OpenAI grew 28.0%, and new contract signings increased 228.0%.

Terms with OpenAI have shifted from revenue-sharing to capped payments. Microsoft no longer holds exclusivity under a non-exclusive license through 2032 but remains OpenAI’s primary cloud provider. The company projects more than $280 billion in Azure AI revenue linked to OpenAI over five to ten years.

Copilot adoption remains early. As of January 2026, paid seats totaled about 15 million, roughly 3.3% of an estimated 450 million Microsoft 365 commercial users, at a price of $30 per user per month.

Analysts expect Azure growth to slow further to the low-to-mid 30% range in fiscal fourth quarter. Revised OpenAI economics are projected to add about $700 million to Microsoft’s fiscal 2026 revenue, scaling to $5.1 billion by fiscal 2030 and contributing roughly a one-percentage-point uplift to Azure growth in fiscal 2027.

The upcoming report will test whether Microsoft can maintain cloud momentum while managing elevated capital spending and the evolving OpenAI partnership, balancing top-line strength against near-term margin and free cash flow pressures.