Microsoft Q3: $82.89B revenue, EPS $4.27 beats estimates
- Microsoft said on April 29 its fiscal third-quarter revenue hit $82.9 billion and diluted EPS reached $4.27, beating Wall Street forecasts. - Azure grew 35% overall and 40% in constant currency, while Microsoft said Microsoft 365 Copilot now has more than 20 million paid seats. - Investors fixated on AI spending instead — with Q4 capex guided to $40 billion and calendar 2026 capex pegged near $190 billion.
Microsoft just showed the clean version of the AI story Big Tech has been promising. Sales were strong. Profit was strong. Azure accelerated. Copilot kept growing. And the stock still dropped. That tells you what investors care about now — not whether AI demand exists, but how expensive it will be to keep feeding it and how long the payoff takes. ### Why was this quarter a big deal? The headline numbers were hard to argue with. Microsoft posted $82.9 billion in revenue for the quarter ended March 31, 2026, up 18% year over year, with diluted EPS of $4.27 and net income of $31.8 billion. That beat consensus expectations and kept Microsoft in the same lane it has occupied for a while now — one of the few megacaps turning the AI boom into obvious top-line growth. (news.microsoft.com) ### What actually drove the beat? Cloud did most of the work. Microsoft Cloud revenue reached $54.5 billion, up 29%, and Intelligent Cloud revenue came in at $34.7 billion. The most watched line was Azure and other cloud services, which grew 35% reported and 40% in constant currency. That matters be(news.microsoft.com)mpute and buying more AI services on top, the whole thesis looks more real. (news.microsoft.com) ### Where does Copilot fit in? Copilot is the other proof point investors wanted. Microsoft said it now has more than 20 million Microsoft 365 Copilot paid seats, up from 15 million the prior quarter, and the number of customers with more than 50,000 seats quadrupled from a year earlier. Basically, (news.microsoft.com)ducts companies already use. (microsoft.com) ### So why did the stock fall? Because the bill is getting bigger, fast. Microsoft’s cloud gross margin slipped to 66%, down from 67% in the prior quarter and below the year-ago level, as AI infrastructure spending and AI usage costs rose. The company also said Q4 capital expenditures would be about $40 billion, and investors focused(microsoft.com)rosoft is spending at a pace that forces the market to ask when margins stop getting squeezed. (microsoft.com) ### Is this just a Microsoft problem? Not really. This is the new AI trade in one paragraph: hyperscalers are winning demand and scaring investors at the same time. Microsoft’s numbers look strong on their own, but the market is now comparing AI revenue growth with AI infrastructure bills across the whole sector. Once that happens, “bea(microsoft.com)to durable returns, not just bigger clusters of GPUs. (finance.yahoo.com) ### What about the huge backlog number? That was another eye-catching detail. Commercial remaining performance obligation hit $627 billion, up 99% year over year, though part of that jump was tied to OpenAI. Strip that out and growth looked closer to n(finance.yahoo.com)ear-term spending spooks the market. (news.microsoft.com) ### Did anything else matter this week? Yes — Microsoft also updated investors on its OpenAI relationship just before earnings. The revised arrangement means Microsoft no longer has to make revenue-sharing payments to OpenAI, while OpenAI still pays Microsoft, but Microsoft no longer has exclusive a(news.microsoft.com)ple “Microsoft owns the best AI pipe” story investors got used to. (finance.yahoo.com) ### Bottom line? Microsoft proved the demand side again. The catch is that investors have moved on to the cost side. Until the company shows that AI revenue can outrun AI capex without grinding down margins, every strong quarter may come with the same reaction — good business, uneasy stock.
