REDMOND, Washington, April 29, 2026, 13:45 PDT
- Microsoft topped estimates for both earnings and revenue, thanks in part to a 40% jump in Azure. Its AI segment is now running at a $37 billion annual revenue clip.
- Shares slid almost 2% after hours as investors zeroed in on the pace of returns from AI infrastructure spending.
- Microsoft, Alphabet, Amazon, and Meta all had a crucial earnings hurdle for the AI trade just as the report hit.
Microsoft blew past Wall Street’s fiscal third-quarter estimates on Wednesday, thanks largely to Azure cloud revenue surging 40%. Still, shares slipped after hours, with investors apparently looking for more tangible payoff from the tech giant’s big AI investments.
Microsoft’s numbers carry fresh weight these days, as the company stands front and center in the debate over whether a surge in artificial intelligence investment is translating into lasting revenue streams. After the close, all eyes were on the big four — Microsoft, Alphabet, Amazon, and Meta — with investors sizing up their spending plans. Reuters put the potential AI infrastructure bill at more than $600 billion this year.
Microsoft posted an 18% jump in revenue, reaching $82.9 billion for the quarter ending March 31. Net income climbed to $31.8 billion, up 23%. Diluted EPS hit $4.27. CEO Satya Nadella pointed to explosive growth in the company’s AI division, saying its annualized revenue run rate crossed $37 billion—marking a 123% increase from last year.
Annual revenue run rate takes the latest sales figures and extrapolates them over a full year. It’s different from reported full-year revenue, though investors often look at it to get a sense of a new business line’s growth pace.
Azure and the rest of Microsoft’s cloud lineup posted 40% growth—39% when adjusted for currency effects. Microsoft Cloud pulled in $54.5 billion in revenue, a 29% increase. On top of that, commercial remaining performance obligation, which tracks contracted but unrecognized revenue, surged 99% to $627 billion.
CFO Amy Hood pointed to “strong execution and growing demand for the Microsoft Cloud” after the company beat forecasts on revenue, operating income, and earnings per share. Microsoft reported a 30% jump in Intelligent Cloud segment revenue, bringing in $34.7 billion. Microsoft
Investors held back. Microsoft shares slipped almost 2% after hours, with the Azure number simply matching consensus rather than beating it, Reuters said—even if growth picked up from last quarter’s 39%.
Competition turned up uneven results. Google Cloud, still trailing the bigger players, logged a 63% jump in revenue—topping forecasts and sending Alphabet stock up more than 4%, according to Reuters. Amazon, for its part, rolled out OpenAI’s newest models plus the Codex coding tool on its cloud platform, chipping away at Microsoft’s exclusive edge with OpenAI.
Azure’s constant-currency growth edged past the consensus analyst forecast of 38%, Bloomberg said, but performance obligations dropped to $629 billion—down from last quarter’s $631 billion by their math. That’s kept attention fixed on Microsoft’s ability to ride the wave of AI demand.
One concern: AI appetite could stay hot even as margins and cash flow face pressure. Microsoft reported a drop in gross margin percentage, citing ongoing spending on AI infrastructure and higher AI product usage. Efficiency improvements in Azure and Microsoft 365 Commercial cloud helped cushion the impact, but not enough to prevent the decline.
Capital spending remained a sticking point. Microsoft’s capital expenditure climbed 49% to $31.9 billion for the quarter, according to Reuters, coming in short of Wall Street’s $34.9 billion estimate. That’s down from $37.5 billion spent in the prior quarter.
On Wall Street, patience for the AI trade looks thin. “Somewhere in the next couple of quarters,” BCA Research strategist Noah Weisberger told Reuters, capital spending will have to start showing up as revenue growth for investors. Reuters
Microsoft’s quarterly conference call lands later Wednesday, but for now, the numbers reveal cloud strength is holding up. The tougher part, and what’s driving the share price, is the cost of sustaining all that momentum.
