Microsoft Azure returns to 40% growth, with annual capital expenditure soaring to $190 billion

Microsoft announces FY26 Q3 financial results, with revenue of $82.89 billion, up 18% year-over-year, surpassing analyst expectations of $81.39 billion. Adjusted earnings per share are $4.27, above the expected $4.06. Operating profit is $38.4 billion, up 20% year-over-year. Revenue from Azure and other cloud services grew 40% (39% at constant exchange rates), exceeding the previous guidance of 37% to 38%. AI business annualized revenue reached $37 billion, up 123% year-over-year. Microsoft 365 Copilot paid seats surpassed 20 million, with CEO Nadella stating that Copilot’s weekly active users are now on par with Outlook. Microsoft’s total cloud revenue is $54.5 billion, an increase of 29%. CFO Amy Hood raised the full-year capital expenditure estimate to $190 billion, with about $25 billion from component price increases, far exceeding the previous analyst estimate of $154.6 billion. Gross margin declined to 67.6%, the lowest since 2022.