Microsoft Azure revenue up 40% in fiscal Q3

Microsoft said its cloud revenue in the fiscal third quarter was up 29% from a year ago and Microsoft Azure revenue surged 40%.

The company reported third quarter net income of $31.8 billon, or $4.27 a share, on revenue of $82.9 billion, up 18%. Wall Street was expecting Microsoft to report fiscal third quarter non-GAAP earnings of $4.06 a share on revenue of $81.43 billion.

CEO Satya Nadella said Microsoft’s AI business had an annual revenue run rate of $37 billion, up 123% from a year ago. CFO Amy Hood added that Microsoft executed well and continued to see growing demand.

By the numbers:

• Microsoft Cloud revenue in the fiscal third quarter was $54.5 billion. Commercial remaining performance obligation increased 99% to $627 billion.
• Microsoft 365 Commercial cloud revenue was up 19 and consumer cloud revenue was up 33% from a year ago.
• Dynamics 365 revenue was up 22%.
• Intelligent Cloud revenue was $34.7 billion, up 30%.

The quarter in Microsoft news:

• OpenAI goes multi-cloud in amended deal with Microsoft
• Microsoft adds slew of AI agents in Dynamics 365 Contact Center, Sales, Customer Insights
• Microsoft 365 Copilot’s Researcher agent goes multi-model
• Microsoft launches new E7 suite to integrate AI agents, Work IQ
• Microsoft CEO Nadella: AI efficiency drive on deck

Nadella said the following on a conference call:

• "We added another gigawatt of capacity this quarter and remain on track to double our overall footprint in just two years. We are moving aggressively to add capacity aligned to our demand signals we see and we have announced new data center investments across four continents."
• "Our Maia 200 AI accelerator, which offers over 30% improved tokens per dollar compared to the latest silicon in our fleet, is now live in our Iowa and Arizona data centers. Our cobalt server CPU is deployed in nearly half of our data center regions, running workloads at scale for customers like Databricks, Siemens and Snowflake."
• "We remain focused on our First party model work to differentiate our high value copilots and agents and reduce cost of goods sold."
• "WorkIQ now spans more than 17 exabytes of data, growing 35% year over year. The liquidity and freshness of that data matters, with billions of emails, documents, chats, hundreds of millions of Teams meetings and millions of SharePoint sites added each day. That context is getting even richer as Copilot adoption grows with Copilot and agent conversations and artifacts. They create feedback into WorkIQ making it even more context rich."

Hood said capital expenditures for calendar 2026 will be about $190 billion with $25 billion of that sum due to higher component costs. Microsoft Azure revenue growth should "show some modest acceleration" in the second half of calendar 2026.

Microsoft said total revenue for the fourth quarter will be $86.7 billion to $87.8 billion with capital expenditures topping $40 billion.

Here's a look at the rest of the outlook.