Microsoft Q3 2026 Earnings Show AI Cloud Momentum

Microsoft Corporation (MSFT) reported fiscal Q3 2026 earnings after the market close on April 29, 2026, highlighting rising AI-driven demand and accelerating cloud adoption. The company outlined increased capital spending and raised analysts’ long-term growth expectations.

Quarter Results and AI Growth

Microsoft posted revenue of $82.9 billion, up 15.0% year-over-year, with adjusted earnings per share of $4.27. The company emphasized sustained confidence in long-term growth amid strong demand for cloud and AI-enabled products.

Microsoft Cloud revenue reached $54.5 billion, rising 29.0% year-over-year and 25.0% on a constant-currency basis. Azure grew 40.0% on a constant-currency basis, up from 39.0% in the prior quarter, reflecting continued momentum in infrastructure and platform services.

The AI business annual revenue run rate surged 123.0% year-over-year to $37.0 billion, underscoring AI’s emergence as a distinct commercial driver. This rapid growth, combined with expanding enterprise adoption, has led some investors to reassess Microsoft’s longer-term growth prospects.

Commercial remaining performance obligations (RPO), a measure of contracted future revenue, reached $627 billion, up 99.0% year-over-year. This backlog provides greater visibility into future revenue tied to Microsoft’s cloud platform.

Revenue in Productivity and Business Processes totaled $35.0 billion, up 17.0% year-over-year and 13.0% on a constant-currency basis, driven by steady adoption of core productivity suites and related services.

Paid Microsoft 365 Copilot users rose to 20 million from 15 million in January 2026, marking rapid growth in paid adoption of the company’s AI productivity features. Management cited this increase as evidence of commercial traction for AI-enabled offerings.

Over the first nine months of fiscal 2026, Microsoft’s revenue totaled $242 billion, up 18.0% year-over-year, while operating income rose 21.0%, reflecting sustained expansion across major business lines.

Capital Spending and Outlook

Capital expenditures in the quarter were $31.9 billion, up 49.0% year-over-year but below the $37.5 billion recorded in the prior quarter. Management said this spending supports broad capacity expansion for cloud and AI workloads.

CFO Amy Hood disclosed a calendar-2026 capital plan of $190 billion, noting that about $25 billion of the increase reflects higher component costs such as chips. Hood expressed confidence that these investments will deliver returns amid stronger demand and rising product usage.

For the fourth quarter, Microsoft guided Azure and other cloud growth to 39.0% to 40.0% on a constant-currency basis, above the 36.7% estimate. The company set total Q4 revenue guidance between $86.7 billion and $87.8 billion, with Intelligent Cloud revenue projected at about $38.0 billion to $38.3 billion. It also forecasted capital spending above $40 billion, including roughly $5 billion tied to higher component pricing and finance leases. These targets reflect management’s view of durable cloud and AI demand and support the company’s increased investment plan.

The accelerating AI run rate, expanded commercial backlog, and above-consensus cloud guidance signal a deliberate push to scale AI infrastructure and services rapidly, with management betting that near-term investment will underpin longer-term growth.