Microsoft shares fell 2% on Wednesday after the software maker reported lower-than-expected capex as earnings and revenue topped estimates.
Here’s how the company fares against the LSEG consensus:
- Earnings per share: $4.27 adjusted vs. $4.06 expected
- Net worth: $82.89 billion compared to $81.39 billion expected
Microsoft’s revenue grew 18% year over year in the quarter, which ended March 31, according to the statement.
Net income of $31.78 billion, or $4.27 per share, increased from $25.82 billion, or $3.46 per share, in the same quarter last year. Adjusted earnings exclude a $14 million decline in revenue from Microsoft’s OpenAI investment.
Regarding guidance, Microsoft’s chief financial officer, Amy Hood, called for $86.7 billion to $87.8 billion in fourth-quarter revenue. Analysts polled by LSEG were looking for $87.53 billion. Microsoft foresees Azure growth of between 39% and 40% in constant currency, above the StreetAccount consensus of 37%.
Microsoft reported $31.9 billion in third-quarter finance and lease expenses, up 49% and below the $34.9 billion consensus among analysts polled by Visible Alpha. Gross margin, at 67.6%, was the narrowest since 2022, as depreciation costs increased in connection with the construction of the company’s data center infrastructure.
Revenue from Microsoft Azure and other cloud services increased 40%. Analysts polled by StreetAccount and CNBC had expected 39.3% and 38.8%, respectively.
The complete segment of Intelligent Cloud which consists of Azure, server products and cloud services of GitHub and Nuance posted a revenue of 34.68 billion. The total came in above the $34.27 billion consensus among analysts surveyed by StreetAccount.
Microsoft’s Productivity and Business Processes segment, which includes Office productivity software, LinkedIn and Dynamics business software, reached $35.01 billion in revenue. This figure is up nearly 17% and above StreetAccount’s $34.43 billion deal.
The company now has more than 20 million seats of the 365 Copilot artificial intelligence add-on for Office of Marketing subscriptions. In January, the company unveiled 15 million seats.
“Weekly interactions are now on par with Outlook as more users make Copilot a habit,” said CEO Satya Nadella on Microsoft’s earnings call.
Microsoft’s More Personal Computing unit, which includes the Windows operating system, Xbox, Surface devices and Bing search advertising, contributed $13.19 billion in revenue, down 1%. StreetAccount’s consensus was $12.73 billion.
Sales of Windows licenses to device manufacturers and Microsoft devices fell 2%.
Technology industry researcher Gartner estimated that PC shipments rose 4% during the quarter. Microsoft now has 1.6 billion active Windows devices, Nadella said.
Annual revenue from AI in total now stands at $37 billion, up 123%. The number includes business from customers using AI services on Azure, including all revenue from model builders, as well as revenue from Microsoft’s AI tools. AI systems that use central processing units, storage and other resources, except for modelers, are left out.
Microsoft now has $627 billion in remaining commercial performance obligations, which include unearned revenue and amounts to be recognized as revenue. The number is up $2 billion from the previous quarter.
During the quarter, Office’s top software leader, Rajesh Jha, announced plans to retire, as did gaming chief Phil Spencer.
As of Wednesday’s close, Microsoft stock is down 12% so far in 2026, following its worst quarterly performance since 2008. That’s due in part to broader market concerns that AI will eat away at software, and company-specific fears that its massive AI investments won’t yield the desired results.
Tech stocks are poised to end their best month since April 2020, the early days of the Covid pandemic, with the Nasdaq up 14% for the month as of Wednesday’s close. Wall Street has been bullish on the sector despite concerns that rising oil prices and supply disruptions from the Iran war will lead to higher AI infrastructure costs. Four hyperscalers – Alphabet, Amazon, Meta and Microsoft – all reported results on Wednesday, reviving investors for the first time since the US began fighting in Iran in late February.
Management will discuss the results with analysts and provide guidance on a conference call beginning at 5:30 pm ET.
This is the best news. Please refresh for updates.
WATCH: Microsoft leads in revenue and earnings estimates, Azure revenue grows 40%
