Microsoft Reports Strong Q3 FY2026 Earnings, Fuelled by AI Growth

MSFT reported Q3 FY2026 results on April 29, delivering revenue of $82.9 billion (up 18% year-over-year) and adjusted EPS of $4.27 — both beating consensus estimates of $81.4 billion and $4.06, respectively. Net income rose 23% to $31.8 billion, driven by accelerating demand for Microsoft's AI-infused cloud portfolio.

Azure cloud infrastructure grew 40% year-over-year, exceeding analyst expectations of 37%, while Microsoft's AI business hit a $37 billion annual revenue run rate with 20 million paid Microsoft 365 Copilot seats. The company's commercial remaining performance obligations surged 99% to $627 billion, pointing to sustained enterprise demand well into future quarters. Goldman Sachs raised its price target on MSFT from $600 to $610 following the beat, citing durable AI monetization.

The one note of caution: capital expenditure is running at a $190 billion full-year pace as Microsoft races to build out AI compute capacity, which compressed gross margins to 67.6% — their lowest level since 2022. Bulls argue the capex is front-loading returns that will accrue over the next several years; bears flag margin pressure and the risk that AI infrastructure spending fails to convert to proportionate revenue at scale.

Related Stocks

• MSFT
• GS