01—Abstract
Summary
Summary of the 8-K filed April 29, 2026. Cited figures are marked; the original filing is the authoritative source.
Microsoft reported fiscal Q3 2026 results (quarter ended March 31, 2026) that beat expectations on revenue, operating income, and EPS.
Revenue reached $82.9 billiona, up 18% year-over-year (15% in constant currency), while operating income rose 20% to $38.4 billion. GAAP net income was $31.8 billion (up 23%), and diluted EPS was $4.27 (up 23%). Non-GAAP results, which exclude the small impact of OpenAI investment losses, showed net income up 20% and EPS up 21%, with the impact on EPS essentially negligible this quarter ($14 million net income impact versus $583 million a year earlier).
The growth engine remained cloud and AI. Microsoft Cloud revenue rose 29% to $54.5 billionb, Azure and other cloud services grew 40% (39% in constant currency), and the company said its AI business surpassed a $37 billion annual revenue run rate, up 123%. Commercial remaining performance obligation nearly doubled, up 99% to $627 billion, signaling substantial contracted future demand.
Intelligent Cloud revenue grew 30% to $34.7 billionc, and Productivity and Business Processes grew 17% to $35.0 billion. More Personal Computing was the laggard, declining 1% to $13.2 billion on softness in Windows OEM and Xbox. The balance sheet and cash flow highlight the scale of AI infrastructure spending.
Additions to property and equipment reached $30.9 billiond in the quarter (versus $16.7 billion a year ago), and nine-month capex totaled $80.1 billion. Operating cash flow of $46.7 billion comfortably funded this build-out, and Microsoft returned $10.2 billion to shareholders via dividends and buybacks.
Total assets grew to $694 billion, with property and equipment up substantially. Forward guidance was not included in the release and was to be given on the earnings call.
02—Key points
Key Highlights
- Revenue of $82.9B grew 18% (15% constant currency), and operating income of $38.4B grew 20%, ahead of management's own expectations per CFO commentary.
- GAAP diluted EPS of $4.27 rose 23%; non-GAAP EPS of $4.27 rose 21%, with OpenAI investment impact effectively zero this quarter versus $0.08 a year earlier.
- Azure and other cloud services revenue grew 40% (39% constant currency), and Microsoft Cloud revenue reached $54.5B, up 29%.
- AI business surpassed a $37B annual revenue run rate, up 123% year-over-year, per CEO Satya Nadella.
- Commercial remaining performance obligation rose 99% to $627B, indicating a large backlog of contracted future revenue.
- Capital expenditures on property and equipment nearly doubled to $30.9B in the quarter, and nine-month capex reached $80.1B, reflecting heavy AI infrastructure investment.
- More Personal Computing revenue fell 1% to $13.2B, with Windows OEM and Devices down 2% and Xbox content and services down 5%, a notable weak spot in the portfolio.
03—Questions
Frequently Asked Questions
Did Microsoft beat expectations in this quarter?
According to CFO Amy Hood, results exceeded expectations across revenue, operating income, and earnings per share. The release itself does not provide consensus comparisons, so the size of the beat relative to analyst estimates is not disclosed here.
How significant is the OpenAI investment impact on reported earnings?
This quarter it was minimal: net losses from OpenAI investments reduced net income by only $14 million and had negligible effect on EPS. A year earlier the impact was $583 million, or $0.08 per diluted share, so the non-GAAP adjustment mainly flatters the prior-year comparison.
What is driving Microsoft's growth and what is the outlook?
Growth is led by Azure (up 40%) and the broader Microsoft Cloud (up 29%), supported by AI revenue now at a $37B run rate. The release provides no forward guidance; management said it would give guidance on the earnings call, so investors should consult that call for revenue and margin expectations.
Is Microsoft's heavy spending on AI infrastructure sustainable?
Capex of $30.9B in the quarter is large, but operating cash flow of $46.7B covered it with room to spare, and the $627B commercial backlog suggests substantial contracted demand. Investors should watch whether capex growth continues to outpace revenue and whether returns on this spending materialize in margins.
Which parts of the business are weakening?
More Personal Computing declined 1% in revenue, with Windows OEM and Devices down 2% and Xbox content and services down 5%. Operating income in that segment still grew modestly, to $3.7B from $3.5B, so the weakness is in top-line trends rather than profitability.
04—Continue