Microsoft Q3 FY2026 earnings: cloud and AI demand drive 18% revenue growth
Microsoft's fiscal Q3 2026 revenue grew 18% year-over-year to $82.9 billion, powered by strong Azure and AI demand, alongside wider profit margins and heavy planned AI infrastructure spending.
| Q3 2026 | Reported |
|---|---|
| EPS | $4.27 |
| Revenue | $82.89B |
Figures as reported by the company to the SEC for the quarter ended March 31, 2026. Analyst estimates are not part of a filing, so no comparison to expectations is shown.
Key takeaways
- Total revenue rose 18% from a year earlier, driven mainly by Microsoft’s cloud business: Microsoft Cloud revenue grew 29% to $54.5 billion, and Azure (its cloud-computing platform) grew 39% on a currency-adjusted basis.
- Operating income climbed 20% year-over-year to $38.4 billion, and the operating margin improved to 46.3% from 45.7% a year earlier, meaning Microsoft kept a larger share of each revenue dollar as profit after covering everyday business costs.
- Trailing-twelve-month fundamentals point to broad profitability: gross margin near 68%, net profit margin above 40%, and return on equity above 33%, alongside per-share earnings growth of roughly 32% versus the prior year.
- Microsoft said its AI-related business - including Copilot subscriptions, AI usage on Azure, and other AI services - is now running at an annualized revenue pace of about $37 billion, up 123% from a year ago.
- CEO Satya Nadella pointed to rising use of Copilot, saying weekly engagement with the AI assistant has reached the same level as Outlook, suggesting it is becoming a regular habit for users.
- CFO Amy Hood said Microsoft expects to remain capacity-constrained - meaning demand for cloud and AI computing power continues to outpace what its data centers can currently supply - through the rest of 2026.
- For the current quarter, Microsoft guided total revenue of $86.7 billion to $87.8 billion, with Azure growth expected in the 39%-40% range on a constant-currency basis.
- Hood guided full calendar-year 2026 capital spending to roughly $190 billion, up 61% from 2025, underscoring continued heavy investment in AI and data-center infrastructure.
- Coverage of the results noted that Microsoft’s cloud and AI momentum was the dominant theme investors and analysts focused on, alongside the scale of planned capital spending on data centers.
Q3 2026 in context
| Metric | Mar 2026 | Mar 2025 | Change |
|---|---|---|---|
| Revenue | $82.9B | $70.1B | +18.3% |
| Net income | $31.8B | $25.8B | +23.1% |
| Free cash flow | $15.8B | $20.3B | -22.1% |
| Diluted EPS | $4.27 | $3.46 | +23.4% |
| Gross margin | 67.6% | 68.7% | -1.1 pts |
| Operating margin | 46.3% | 45.7% | +0.7 pts |
| Net margin | 38.3% | 36.9% | +1.5 pts |
Figures for the quarter ended Mar 2026 and the quarter ended Mar 2025, as reported to the SEC.
Each company's quarter ending in calendar Q1 '26, as reported to the SEC. A peer that reported no revenue figure for that quarter is left out.
How the stock took it
Microsoft Corporation closed at $429.25 on Apr 28, 2026, the last session before the report, and at $407.78 on Apr 30, 2026, the first session after it — -5.0% across the report.
| Earlier report | Close before | Close after | Change |
|---|---|---|---|
| Jan 28, 2026 | $480.58 | $433.50 | -9.8% |
| Oct 29, 2025 | $542.07 | $525.76 | -3.0% |
Closes from the market's daily record. Each figure spans the report date — from the last session that closed before it to the first that closed after — because a company may report before the open or after the close.
Sources: company report · earnings call · CNBC