Microsoft highlights Azure AI surge

Microsoft used its April 29 fiscal third-quarter earnings report to put hard numbers on a trend investors had been pressing it to prove: that heavy AI spending is translating into faster cloud growth. The company said revenue for the quarter ended March 31 rose 18% to $82.9 billion, while Microsoft Cloud revenue increased 29% to $54.5 billion. Azure and other cloud services revenue grew 40%, and Microsoft said its AI business had surpassed a $37 billion annual revenue run rate, up 123% from a year earlier. ### What did Microsoft actually show in the quarter? Microsoft’s April 29 earnings release said operating income rose 20% to $38.4 billion and net income increased 23% to $31.8 billion. Diluted earnings per share were $4.27, also up 23% on a GAAP basis. Satya Nadella, Microsoft’s chairman and chief executive, said the company was focused on “delivering cloud and AI infrastructure and solutions” for customers using AI in business workflows. (microsoft.com) The March-quarter numbers were notable because Azure growth accelerated while Microsoft continued to spend heavily on data centers and AI hardware. GeekWire reported that the Azure result topped Microsoft’s own forecast, giving the company a clearer answer to investor questions about whether record infrastructure spending was producing measurable revenue growth. (microsoft.com) ### Which number mattered most to investors? The 40% Azure growth figure was the clearest signal because Azure is Microsoft’s main cloud platform for enterprise computing and AI workloads. Microsoft did not break out Azure revenue in dollars, but it said the broader Intelligent Cloud segment generated $34.7 billion in revenue, up 30% year over year. (geekwire.com) The $37 billion AI annual revenue run rate was the second figure investors seized on. Microsoft said that business was up 123% from a year earlier, and GeekWire noted it was the first time the company had updated the metric since reporting a $13 billion run rate in January 2025. ### Where is the enterprise demand showing up? Microsoft said commercial remaining performance obligation, a measure of contracted future revenue, rose 99% to $627 billion. (geekwire.com) That backlog, together with growth in Microsoft Cloud revenue, pointed to continued enterprise commitments across Azure, Microsoft 365 and AI-related services. GeekWire also reported that Microsoft 365 Copilot exceeded 20 million paid seats in the quarter, up from 15 million in January. (microsoft.com) That increase offered another measure of how quickly Microsoft is turning AI products into paid enterprise software rather than experimental deployments. ### Did Microsoft say anything about constraints or costs? (microsoft.com) TipRanks’ call summary said management paired the growth figures with warnings about margin pressure, large capital expenditures and supply constraints tied to AI expansion. The summary said Microsoft emphasized execution on capacity, efficiency and a multi-year return-on-investment view for AI infrastructure spending. (geekwire.com) The same summary said Azure capacity constraints were expected to persist through 2026, even as Microsoft projected modest acceleration in the second half of the calendar year. TipRanks also said Microsoft expected fourth-quarter capital expenditures to exceed $40 billion. ### What does the company’s guidance say about the next quarter? TipRanks said Microsoft guided for fiscal fourth-quarter revenue of $86.7 billion to $87.8 billion. (tipranks.com) The company’s segment outlook included Intelligent Cloud revenue of $37.95 billion to $38.25 billion and Azure growth of 39% to 40% in constant currency. Microsoft’s investor relations page lists the next earnings report for fiscal fourth quarter 2026 in late July, and TipRanks lists July 28, 2026 as the expected date. (tipranks.com) That report will show whether Azure can sustain the growth rate Microsoft posted in the March quarter while expanding AI capacity.