Microsoft reported record revenue of $82.89 billion in its third fiscal quarter, up 18% year-over-year, with cloud revenue hitting $54.5 billion (up 29%). Azure grew 40%, and the company expects similar growth next quarter. Microsoft 365 Copilot now has over 20 million paying users, up from 15 million in January. CEO Satya Nadella noted that Copilot's weekly usage now matches Outlook, signaling that AI use is becoming habitual.
Like Google, Microsoft plans $190 billion in capital expenditures for 2026, exceeding analyst estimates. However, capacity will remain tight through at least the end of 2026. Next quarter's revenue and margin forecasts fell short, leading to a 5% stock drop. Microsoft also declined to break out AI-specific numbers, leaving uncertainty about how much of Azure's growth is AI-driven, Copilot's standalone profitability, and direct revenue from OpenAI.
Nadella addressed concerns that AI might reduce traditional software license sales by shifting to a usage-based model. "Any per-user business of ours... will become a per-user and usage business," he said. GitHub Copilot has already moved to a token-based billing model. If smaller teams using more AI match larger teams' productivity, lower license revenue could be offset by higher usage fees.
Nadella emphasized that AI success hinges on intense usage and value creation. "It's more about getting intense users and intense usage," he stated. However, measuring AI's overall impact on company results remains challenging, as individual productivity gains don't always translate to bottom-line improvements.