NEW YORK, April 29, 2026, 17:01 EDT
- Microsoft topped profit and revenue forecasts for its fiscal third quarter, as Azure growth picked up speed.
- The company’s artificial-intelligence division is now clocking an annual revenue run rate of $37 billion—an increase of 123% from a year ago.
- After the bell, shares slid. Investors zeroed in on AI data center spending and how quickly those investments might pay off.
Microsoft topped Wall Street’s forecasts for its fiscal third quarter Wednesday, powered by a 40% surge in Azure revenue and its AI business hitting a $37 billion annual run rate. Still, shares dipped in after-hours trading, as investors zeroed in on spending required for the company’s expansion, despite the earnings beat.
This quarter stands out, with Microsoft now serving as a bellwether for whether big tech can actually convert surging AI interest into steady cloud sales. Azure, its key cloud platform, is powering most of that expectation. Investors zeroed in on its 40% growth—looking for evidence that heavy spending on chips and data centers is still driving top-line results.
Microsoft CEO Satya Nadella pointed to “cloud and AI infrastructure” as the company’s top priority, highlighting that AI now brings in revenue at a $37 billion annual run rate. That’s based on the latest sales trend, projected out over a year. CFO Amy Hood added that revenue, operating income and EPS all came in above forecasts, attributing the outperformance to strong Microsoft Cloud demand. Microsoft
For the quarter ended March 31, revenue jumped 18% to $82.9 billion. Net income increased 23%, reaching $31.8 billion. Diluted earnings hit $4.27 per share, beating FactSet’s forecast of $4.05 per share and topping the expected $81.4 billion in revenue.
Microsoft Cloud reported a 29% jump in revenue, reaching $54.5 billion. The company’s commercial remaining performance obligation—a gauge of sales locked in but not yet recognized—almost doubled, up 99% to $627 billion. That figure points to the scale of business Microsoft already has lined up.
Productivity and Business Processes—home to Microsoft 365 and LinkedIn—delivered $35.0 billion in revenue, marking a 17% increase. Intelligent Cloud brought in $34.7 billion, up 30%. On the flip side, More Personal Computing slipped 1% to $13.2 billion, reflecting weaker numbers from Windows OEM, devices, and Xbox content and services.
Investors didn’t rush in. Microsoft shares slipped over 2% after hours, tacking onto a 1.1% drop from earlier—even with the company posting stronger-than-expected earnings.
Still, risks remain. Capital expenditure climbed 49% to $31.9 billion—short of the $34.9 billion Wall Street was looking for, according to Reuters. Free cash flow dropped to roughly $15.8 billion, down from $20.3 billion a year ago, Microsoft’s cash-flow statement shows.
The spending fight isn’t just a Microsoft story. Alphabet and Amazon, both chasing AI cloud business, logged robust cloud demand on Wednesday, turning up the heat on Azure as Microsoft ramps up its own capacity. Reuters put the big cloud providers’ expected spend on AI infrastructure above $600 billion for this year.
The Microsoft-OpenAI relationship is shifting again. According to Reuters, Microsoft keeps its 20% share of OpenAI revenue until 2030, but loses exclusive resale rights for OpenAI products on its cloud. This change comes as Amazon and Alphabet ramp up competition in AI services.
Wedbush’s Daniel Ives isn’t budging—he calls Microsoft “still in the lead” on AI, brushing off what he sees as an overreaction to Azure’s recent performance. For Evercore ISI’s Kirk Materne, this quarter lands as a “survive and advance” stretch. He says the real signal for Azure’s growth pace probably doesn’t show up until the June-quarter forecast. MarketWatch
Microsoft plans to issue forward guidance during its earnings call at 5:30 p.m. Eastern time. That update could determine if investors see this report as validation of the company’s AI strategy, or if it ends up as another period of solid revenue offset by rising costs.
