• Total revenue: $82.9B (quarter ended March 31, 2026), up 18% y/y (+15% in constant currency); operating income $38.4B (+20% / +16% CC); diluted EPS $4.27 (+23% / +21% non GAAP).
• Microsoft Cloud revenue: $54.5B, +29% y/y (+25% CC). Cloud gross margin 66% (slightly better than Microsoft’s own guidance), down from 69% a year ago.
• Azure & other cloud services revenue: +40% y/y (+39% CC), accelerating from +39% CC in Q2.
• Microsoft 365 Commercial cloud revenue: +19% y/y (+15% CC), ahead of Microsoft’s own expectations. M365 Commercial paid seats grew 6% y/y.
• Commercial remaining performance obligation (RPO): $627B, +99% y/y, weighted average duration roughly 2.5 years. Bookings grew 7% when excluding the impact of OpenAI; including OpenAI, bookings declined 4% (against the giant Q2 OpenAI commitment in the comparable).
• AI business run rate: Surpassed $37B annualized, +123% y/y. Satya’s headline metric on the call.
• Microsoft 365 Copilot: Over 20 million paid seats, with seat adds +250% y/y, the fastest growth since launch. Customers with more than 50,000 seats quadrupled y/y. Accenture committed to 740,000 seats.
• Capital expenditures: $31.9B in Q3 (down sequentially). Q4 capex guided to over $40B. Calendar year 2026 capex expected at roughly $190B (including ~$25B from higher component pricing).
• Q4 FY26 outlook: Revenue $86.7B to $87.8B (+13% to +15%); Azure +39% to +40% CC; Microsoft Cloud gross margin ~64%; capacity constrained at least through 2026; FY27 expected to deliver another year of double digit revenue and operating income growth.
• Capital returned to shareholders: $10.2B in dividends and buybacks.

Segment revenue

Three months ended March 31, 2026 vs. March 31, 2025

The story is the one we’ve been tracking for several quarters, just more pronounced. Intelligent Cloud is doing the heavy lifting (now nearly the same size as Productivity & Business Processes), and More Personal Computing is shrinking as Windows OEM and Xbox content & services continue to drag.

Key growth rates (constant currency)

• Microsoft Cloud revenue: +25% CC (vs. +24% CC in Q2; the absolute dollar number ($54.5B vs. $51.5B) is what’s striking).
• Azure & other cloud services: +39% CC (above the 37 to 38% range Microsoft guided to in Q2; Amy Hood explicitly said results were ahead of expectations because Microsoft delivered capacity earlier in the quarter).
• Microsoft 365 Commercial cloud: +15% CC (ahead of expectations; same headline rate as Q2 but on a bigger base).
• Microsoft 365 Consumer cloud: +29% CC. Strongest growth rate in the M365 family, driven by ARPU growth from last year’s price increase.
• Dynamics 365: +17% CC. Continued share gains across all workloads. Bookings growth was hit by weaker renewals as customers balance per seat vs. the new “seats plus consumption” model.
• LinkedIn: +9% CC. Growth across all lines of business.
• Windows OEM & Devices: (3)% CC. OEM was actually slightly positive and ahead of expectations as channel partners built inventory ahead of memory price increases.
• Xbox content & services: (7)% CC. Tough prior year comparable from strong first party releases.
• Search advertising ex TAC: +9% CC. Continued share gains across Bing and Edge.

Margin and investment signals

• Cloud gross margin landed at 66%. Down from 67% in Q2 and 69% a year ago. Amy Hood was explicit: AI infrastructure investment plus growing GitHub Copilot usage are the drivers, partially offset by ongoing efficiency gains in Azure and M365 Commercial cloud. Q3’s number was actually better than Microsoft’s own guide.
• Capital expenditures were $31.9B in Q3 (down sequentially), and Microsoft has now disclosed a calendar 2026 capex envelope of around $190B. Roughly two thirds of Q3 capex went to short lived assets (primarily GPUs and CPUs) that correlate directly with revenue. Approximately $25B of the calendar 2026 number is attributable to higher component pricing rather than additional volume.
• Operating margins expanded slightly to 46% at the company level despite the AI capex cycle. Total headcount declined y/y, and Microsoft also announced a voluntary retirement program that will cost roughly $900M in Q4.
• Free cash flow was $15.8B in Q3 with operating cash flow of $46.7B (+26%). The gap between the two is essentially the capex story.

This section reflects the actual Q4 guidance Amy Hood delivered on the FY26 Q3 earnings call.

Revenue (Q4 FY26): $86.7B to $87.8B, growth of 13% to 15%. Accelerating commercial offset by weaker consumer.

Inside those numbers

• Azure: +39% to +40% in constant currency. Microsoft is explicitly guiding for the same growth rate it just delivered. Capacity remains the gating factor; Microsoft expects modest Azure acceleration in the second half of calendar 2026 vs. the first half.
• Microsoft 365 Commercial cloud: +15% to +16% CC on an adjusted basis (normalized for last year’s 2 points of in period revenue recognition). Reported CC growth of 13% to 14%. Net paid seat adds expected to rise sequentially, driving continued ARPU growth.
• M365 Commercial products: mid single digit growth (Office 2024 transactional purchasing continues to normalize).
• M365 Consumer cloud: low twenties growth. Down sequentially as the price increase from last year starts to lap.
• LinkedIn: ~10%.
• Dynamics 365: low double digits, down sequentially due to a strong prior year and the shift toward consumption based pricing.
• Windows OEM: down high teens. Microsoft broke this out unusually clearly: roughly 6 points from the Windows 10 end of support comparable, 6 points from inventory normalization, and 6 points from a softer PC market driven by memory pricing. Windows OEM and Devices combined: down mid to high teens.
• Search advertising ex TAC: high single digits.
• Xbox content and services: low teens decline, plus hardware revenue down y/y.
• Microsoft Cloud gross margin: ~64% (down y/y from continued AI investment plus growing GitHub Copilot usage).

Capex and capacity

• Q4 capex above $40B, including roughly $5B from higher component pricing.
• Calendar 2026 capex roughly $190B, of which ~$25B is component price inflation.
• Capacity constrained at least through 2026.
• Mix of short lived assets (GPUs/CPUs) similar to Q3 (around two thirds of total).

Other Q4 line items

• COGS $29.4B to $29.6B (+22% to +23%), including ~$350M from the voluntary retirement program.
• Operating expense $19.3B to $19.4B (+~7%), including ~$550M from the same program.
• Total ~$900M of one time costs from the voluntary retirement program.
• Adjusted Q4 effective tax rate ~19%.
• Despite all of the above, Microsoft expects full year FY26 operating margins up about 1 point y/y.

Forward look into FY27

• Headcount expected to decrease y/y again.
• Operating expense growth in the mid to high single digits.
• “Another year of double digit revenue and operating income growth in FY27.”

These are the product stats Microsoft management called out on the FY26 Q3 earnings call. They carry the most signal for licensing customers because they tell you where Microsoft’s commercial machine is currently focused.

Microsoft 365 Copilot

The standout product number of the quarter. Over 20 million paid seats, up from 15 million at the end of Q2. Seat adds grew 250% y/y, the fastest growth since launch. The number of customers with more than 50,000 seats quadrupled y/y. Accenture is now at 740,000 seats, Microsoft’s largest Copilot deal to date. Bayer, Johnson & Johnson, Mercedes, and Roche each committed to 90,000+ seats. Microsoft also called out 625 product updates over the past year (+50%), and that Copilot weekly engagement is now at the same level as Outlook. First party agent monthly active usage is up 6x year to date, and Copilot queries per user are up roughly 20% quarter over quarter. Agent Mode is now the default in Word, Excel, and PowerPoint.

GitHub Copilot

Nearly 140,000 organizations now use GitHub Copilot; enterprise subscribers nearly tripled y/y. The majority of users leverage multiple models. GitHub Copilot CLI usage is nearly doubling month over month. Microsoft also announced a move to a usage based pricing model for GitHub Copilot, effective June 1. This is a material commercial change that licensing customers will need to model into FY27 budgets.

Microsoft Fabric

35,000 paid Fabric customers, up 60% y/y. The amount of data in Fabric OneLake increased nearly 4x year over year. Over 15,000 customers now use both Foundry and Fabric, also up 60% y/y. Microsoft is clearly succeeding at its strategy of pulling enterprise data onto a single Microsoft owned platform that then becomes the default substrate for AI agents.

Azure AI Foundry

Over 10,000 customers used more than one model on Foundry, with 5,000 using open source models. The number of customers using both Anthropic and OpenAI models doubled quarter over quarter. More than 300 customers are on track to process over a trillion tokens on Foundry this year, +30% QoQ. Bayer is using Foundry to run an internal agent platform with 20,000+ active monthly users. Microsoft also introduced two new first party MAI models (Transcribe-1 for speech to text and Image 2 for image generation), and is starting to bring MAI models to commercial customers (Shutterstock, WPP) via Foundry.

Copilot Studio and Agent 365

Nearly 90% of the Fortune 500 now have active agents built with Microsoft’s low code or no code tools. Copilot Credit consumptive offer usage is nearly 2x quarter over quarter. Agent 365, Microsoft’s governance and identity control plane for agents, is already managing tens of millions of agents across tens of thousands of companies.

Dynamics 365 and Business Apps

Roughly 60% of customer service customers are now buying usage based credits, the clearest example of Microsoft’s broader “seats plus consumption” model. HSBC reduced issue resolution time by over 30% with prebuilt D365 agents. LinkedIn Talent Solutions agentic products surpassed a $450M annualized run rate.

Security

Security Copilot customer count doubled y/y. Microsoft’s data security triage agents handled over 2 million unique alerts in the quarter. 35 billion Copilot interactions have been audited by Purview to date, up 7x y/y, telling you that customers are taking AI governance seriously and that Purview is becoming the de facto control plane.

Infrastructure and capacity

Microsoft added another gigawatt of capacity in the quarter and is on track to double its overall datacenter footprint in two years. Dock to live times for new GPUs in the largest regions improved nearly 20% since the start of the year. The new Fairwater datacenter in Wisconsin came online roughly six weeks ahead of schedule. Microsoft also disclosed that its custom Maia 200 AI accelerator delivers 30%+ better tokens per dollar than the latest external silicon and is now live in Iowa and Arizona. Its custom Cobalt CPU is now in nearly half of Azure regions, with Databricks, Siemens, and Snowflake explicitly named as customers.

Cosmos DB and the broader database business

The databases business accelerated quarter over quarter. Cosmos DB alone grew 50% y/y, driven by AI app workloads. This matters because it confirms the AI run rate is dragging adjacent infrastructure spend (databases, storage, networking) along with it.

Consumer

Monthly active Windows devices surpassed 1.6 billion. Edge has taken share for 20 consecutive quarters. Bing monthly active users hit 1 billion for the first time. LinkedIn has 1.3 billion members. Xbox set new records for monthly active users and game streaming hours despite the revenue decline. Microsoft 365 Consumer is now at nearly 95 million subscribers.

Commercial RPO at $627B (+99% y/y)

The backlog essentially doubled year over year. Weighted average duration is roughly 2.5 years. Roughly 25% of RPO is to be recognized in revenue in the next 12 months (+39% y/y), with the remaining portion (recognized beyond 12 months) up 138%. Stripping out OpenAI, commercial bookings still grew 7% on a tough comparable.

OpenAI partnership update

Microsoft and OpenAI restructured the agreement during the quarter. Worth understanding because it changes the licensing implications somewhat. Microsoft retains royalty free access to OpenAI’s frontier model IP through 2032, and the elimination of Microsoft’s revenue share to OpenAI is a meaningful margin tailwind. OpenAI remains a large Azure customer (AI accelerators plus other compute). Microsoft also retains its equity. The revenue share from OpenAI to Microsoft continues through 2030, which Amy Hood flagged specifically for predictability.

What this means for Microsoft customers

1. Negotiation leverage continues to deteriorate for buyers. RPO doubling y/y, AI revenue at +123%, Azure guided to reaccelerate again into Q4, Copilot seats past 20M with +250% y/y growth in seat adds. None of these are signals that Microsoft needs your business badly enough to discount. If you’re heading into renewal, assume Microsoft will hold firm on price and push for longer terms, broader SKU bundles, and bigger commits. Build your case on consumption optimization and bundle reduction, not on a list price discount.
2. The “seats plus consumption” model is now the default, and it changes how you should buy. Amy Hood and Satya Nadella both said it explicitly: per user pricing is being supplemented (not replaced) by usage based meters across Copilot, Dynamics 365 service, GitHub, and Foundry. The 60% of customer service customers already buying usage credits and the GitHub Copilot move to usage based pricing on June 1 are concrete examples. For licensing customers, the practical implication is to start treating Microsoft commercial agreements like Azure: budget for a baseline commitment plus a consumption pool with overage protections, rather than the simple per seat math you may be used to.
3. AI capacity needs to be planned, not assumed, and it just got more expensive. Microsoft has now told the market that it expects to remain capacity constrained at least through 2026, and that ~$25B of its $190B calendar year capex envelope is component price inflation rather than added volume. That cost pressure shows up in Azure pricing and in M365 Copilot economics. Submit your capacity requirements through your account team early, especially for high end GPU SKUs and specific regions, and treat capacity commitments as a real negotiation lever.
4. 20 million Copilot paid seats is impressive, but underuse is now the dominant risk in your contract. Going from 15M to 20M paid seats in one quarter, with the 50K+ seat customer count quadrupling, tells you Microsoft sales is winning the deployment battle. In our practice we continue to see customers paying for thousands of Copilot seats with active usage rates well below 30%. Run a usage review now; an idle Copilot license is one of the easiest line items to optimize ahead of a true up or renewal. The Accenture 740K seat deal will be the new internal Microsoft benchmark; do not let your account team use it as a target for you without a usage based business case.
5. GitHub Copilot is moving to usage based pricing on June 1. Plan for it. This is the clearest commercial change announced on the call. If GitHub Copilot is a meaningful line item for you, model the impact of usage based pricing on your developer base before the change takes effect, and decide whether to negotiate a commitment now while the per seat option is still available.
6. Watch the cloud gross margin signal in your own Azure bill. Microsoft’s cloud gross margin compressed from 69% to 66% in a year and is guided to ~64% in Q4. The same dynamics flow into Azure list pricing, reservation pricing, and the economics of AI services. If you have not refreshed your Azure reservations, savings plans, or commitment tiers in the last 12 months, you are very likely overpaying.
7. Fabric and Foundry adoption tells you where Microsoft expects your data to live. 35,000 paid Fabric customers (+60% y/y), 15,000+ using Foundry and Fabric together, OneLake data up 4x. The strategy is to make Fabric the default data substrate so that Foundry agents have rich enterprise context to ground on. Customers considering Fabric should evaluate overlap with their existing analytics stack and plan migration and CoE readiness explicitly, rather than letting it land via individual project decisions.
8. The OpenAI agreement change is mostly investor news, but the IP rights through 2032 matter. Microsoft now has royalty free access to OpenAI frontier model IP for the long term. That means the AI features Microsoft ships into Copilot, Foundry, and Azure are unlikely to be repriced upward because of OpenAI fees. The downside risk many enterprise customers worried about (Microsoft passing through OpenAI cost increases) is materially reduced.

• $82.9B total revenue (+18% / +15% CC).
• $54.5B Microsoft Cloud revenue (+29% / +25% CC), new record.
• Cloud gross margin 66% (vs. 67% Q2, 69% prior year).
• Operating income $38.4B (+20% / +16% CC); diluted EPS $4.27 (+23%).
• AI business: $37B+ annualized run rate, +123% y/y.
• Commercial RPO: $627B (+99% y/y), weighted average duration ~2.5 years.
• Azure +40% y/y (+39% CC), guided to +39% to +40% in Q4.
• Microsoft 365 Copilot: 20M+ paid seats; seat adds +250% y/y.
• GitHub Copilot: ~140,000 organizations; enterprise subs nearly tripled y/y.
• Microsoft Fabric: 35,000 paid customers (+60% y/y).
• Foundry: 300+ customers on track to process >1 trillion tokens this year.
• Cosmos DB: +50% y/y revenue growth.
• Dynamics 365 service: ~60% of customers buying usage based credits.
• LinkedIn Talent Solutions agentic products: $450M+ ARR.
• Security Copilot customers: doubled y/y.
• Purview: 35 billion Copilot interactions audited (+7x y/y).
• M365 Commercial seats: +6% y/y; M365 Consumer subscribers: ~95 million (+7%).
• Windows monthly active devices: 1.6B+; Bing MAU: 1B for the first time; LinkedIn members: 1.3B.
• Capex Q3: $31.9B; Q4 guide above $40B; calendar 2026 capex roughly $190B (~$25B of which is component price inflation).
• Free cash flow Q3: $15.8B; cash from operations: $46.7B (+26%).
• Returned $10.2B to shareholders this quarter.
• Q4 FY26 outlook: revenue $86.7B to $87.8B (+13% to +15%); cloud gross margin ~64%; ~$900M one time cost from voluntary retirement program.
• FY27 commitment: another year of double digit revenue and operating income growth.