Microsoft delivered strong third-quarter fiscal 2026 results, reporting total revenue of $82.9 billion, a 18% increase year-over-year or 15% in constant currency.2728 The Microsoft Cloud segment reached $54.5 billion, up 29% year-over-year (25% constant currency), fueled by robust AI demand.27
Key Financial Highlights
Adjusted earnings per share came in at $4.27, surpassing expectations and rising 21% year-over-year (18% constant currency, adjusted for OpenAI investment).27 Gross margin stood at 68%, while operating income grew 20% (16% constant currency) with a 46% margin. The company invested heavily in AI infrastructure, posting $31.9 billion in capital expenditures and generating $15.8 billion in free cash flow. Microsoft returned $10.2 billion to shareholders through dividends and repurchases.
Segment Performance
Productivity and Business Processes revenue hit $35 billion, up 17% year-over-year (13% constant currency). Microsoft 365 commercial cloud grew 19% (15% constant currency), with over 20 million paid Copilot seats and seat additions surging 250% year-over-year.2728
Intelligent Cloud generated $34.7 billion, a 30% increase (28% constant currency), driven by Azure’s 40% growth (39% constant currency).27
More Personal Computing revenue dipped 1% to $13.2 billion (down 3% constant currency), though search advertising revenue excluding TAC rose 12% (9% constant currency).
CEO Satya Nadella’s Insights
Satya Nadella, Chairman and CEO, described the quarter as a record driven by Microsoft Cloud strength. He emphasized the shift to agentic computing, with AI business annual recurring revenue exceeding $37 billion, up 123% year-over-year. Nadella outlined priorities: building leading cloud and AI infrastructure, including adding one gigawatt of capacity and deploying custom Maia 200 accelerators and Cobalt CPUs, and developing high-value agentic systems in productivity, coding, and security.2728
Microsoft 365 Copilot saw rapid adoption, with nearly 90% of Fortune 500 companies using low-code/no-code agents. GitHub Copilot serves 140,000 organizations, with enterprise subscriptions tripling year-over-year.
CFO Amy Hood on Outlook
Executive Vice President and CFO Amy Hood noted results exceeded expectations despite AI investments. Remaining performance obligations reached $627 billion, up 99% year-over-year. For Q4, Microsoft guides total revenue to $86.7-87.8 billion (13-15% growth), Azure growth at 39-40%, and Microsoft Cloud gross margin around 64%. Fiscal 2027 anticipates double-digit revenue and operating income growth, with CapEx around $190 billion in calendar 2026.
Analysts from Morgan Stanley, UBS, Jefferies, Bernstein, Goldman Sachs, and RBC Capital Markets participated in the Q&A, probing AI capacity, Copilot usage, and competitive dynamics.28
