Microsoft (MSFT) Q3 earnings report 2026

Microsoft shares rose 2% on Wednesday after the software maker released a higher-than-expected capex forecast along with higher-than-expected quarterly earnings and revenue forecasts for 2026.

Here is the company’s performance compared to the LSEG consensus:

• Earnings per share: $4.27 adjusted, expected $4.06
• Revenues: 82.89 billion dollars, while the expectation was 81.39 billion dollars

Microsoft’s revenue increased 18 percent year-over-year in the quarter ending March 31. expression.

Net income of $31.78 billion, or $4.27 per share, was up from $25.82 billion, or $3.46 per share, in the same quarter a year ago. Adjusted earnings do not include a $14 million decrease in net income from Microsoft’s investments in OpenAI.

Regarding the guidance, Microsoft’s finance chief Amy Hood called for fiscal fourth-quarter revenue of between $86.7 billion and $87.8 billion. Analysts surveyed by LSEG were looking for $87.53 billion. Microsoft forecasts Azure cloud growth to be between 39% and 40% at constant currency, above StreetAccount’s consensus of 37%.

Hood’s forecast implies that Microsoft’s operating margin in the fiscal fourth quarter will fall from 46.3% to 44%, narrower than StreetAccount’s estimate of 44.6%.

Microsoft reported a 49% increase in capital expenditures and leases to $31.9 billion in the fiscal third quarter; That fell short of the $34.9 billion consensus among analysts surveyed by Visible Alpha. Gross margin was the narrowest since 2022, at 67.6%, due to increased depreciation costs associated with building out the company’s data center infrastructure.

Hood said on a conference call that he expects capital spending of $190 billion for calendar year 2026, with a $25 billion impact from higher component prices. Visible Alpha consensus was significantly lower, at $154.6 billion.

Microsoft’s headcount will decrease year over year in the 2027 calendar year, which ends in June 2027.

“We continue to evolve the way we work to increase our speed and agility,” Hood said.

Revenue from Microsoft’s Azure and other cloud services rose 40%. Analysts surveyed by StreetAccount and CNBC were expecting 39.3% and 38.8%, respectively.

The full Intelligent Cloud segment, which includes Azure, server products, GitHub and Nuance cloud services, generated $34.68 billion in revenue. That sum came in higher than the $34.27 billion consensus among analysts surveyed by StreetAccount.

Total revenue for Microsoft’s Productivity and Business Processes segment, which includes Office productivity software, LinkedIn and Dynamics business software, was $35.01 billion. The figure was up nearly 17%, above StreetAccount’s consensus of $34.43 billion.

The company’s 365 Copilot AI add-on for commercial Office subscriptions now has more than 20 million seats, up from 15 million in January. The number will rise again in the September quarter, Hood said.

“As more and more users make Copilot a habit, weekly engagement is now on par with Outlook,” CEO Satya Nadella said on the earnings call.

Microsoft’s More Personal Computing unit, which includes the Windows operating system, Xbox, Surface devices and Bing search ads, contributed $13.19 billion in revenue, down 1%. StreetAccount’s consensus was $12.73 billion.

Sales of Windows licenses to device manufacturers and Microsoft’s own devices fell 2%.

Technology industry researcher Gartner’s PC shipments are estimated to have increased 4% in the quarter. Microsoft now has 1.6 billion monthly active Windows devices, Nadella said.

Annual revenue from AI is now up 123% to $37 billion. That figure includes all revenue from model builders, as well as business from customers running AI services on Azure, including revenue from Microsoft’s own AI tools. Except for model generators, AI systems that use standard central processing units, storage, and other services were excluded.

Microsoft currently has $627 billion in business remaining performance obligations, covering unearned revenues and amounts that would be recognized as revenues. This figure increased by 2 billion dollars compared to the previous quarter.

During the quarter, Office software’s most senior leader, Rajesh Jha, announced plans to retire, as did gaming chief Phil Spencer.

As of Wednesday’s close, Microsoft shares were down 12% so far in 2026, following its worst quarterly performance since 2008. This is partly due to broader market concern that AI will consume software and company-specific fears that large AI investments will not produce the desired results.

Technology stocks are poised for their best month since April 2020, the early days of the Covid outbreak; The Nasdaq was up 14% for the month as of Wednesday’s close. Wall Street is flocking to the sector despite concerns that rising oil prices and supply chain disruptions from the war in Iran will lead to increased AI infrastructure costs. Four hyperscalers — Alphabet, Amazon, Meta and Microsoft — reported results Wednesday, updating investors for the first time since the U.S. began combat operations in Iran in late February.

Executives will discuss the results with analysts and provide guidance on a conference call starting at 5:30 p.m. ET.

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