Microsoft Corporation Q3 FY2026 earnings call

Microsoft Cloud revenue exceeded $54 billion, up 29% y/y. AI business ARR surpassed $37 billion, up 123%. Optimizing tech stack from DC design to silicon. Microsoft 365 Copilot seat ads increased 250% y/y with over 20 million paid seats. Cosmos DB revenue up 50% y/y. 35,000 paid Fabric customers up 60% y/y. Over 15,000 customers use both Foundry and Fabric up 60% y/y. GitHub Copilot usage growing, announced usage-based pricing. Defender protections sim-shipping for AI-discovered vulnerabilities. Consumer business focusing on fundamentals with Windows, Xbox, Bing, Edge work

Productivity and Business Processes: Revenue $35 billion, grew 17% and 13% in constant currency. M365 Commercial Cloud revenue up 19% and 15% in constant currency; M365 Consumer Cloud revenue up 33% and 29% in constant currency; LinkedIn revenue up 12% and 9% in constant currency; Dynamics 365 revenue up 22% and 17% in constant currency. Intelligent Cloud: Revenue $34.7 billion, grew 30% and 28% in constant currency. Azure and other cloud services revenue up 40% and 39% in constant currency; on-premises server business revenue slightly increased and decreased 3% in constant currency. More Personal Computing: Revenue $13.2 billion, declined 1% and 3% in constant currency. Windows OEM and devices revenue down 2% and 3% in constant currency; search advertising revenue up 12% and 9% in constant currency; Xbox content and services revenue down 5% and 7% in constant currency

Q4 outlook: Total revenue between $86.7 - $87.8 billion, growth 13-15%. Commercial bookings adjusted for OpenAI impact expected healthy growth. Microsoft Cloud gross margin ~64% y/y down. Productivity and Business Processes revenue 37-37.3 billion, growth 12-13%. Intelligent Cloud revenue 37.95-38.25 billion, growth 27-28%. More Personal Computing revenue 11.75-12.25 billion. CapEx expected over $40 billion, FY26 operating margins up ~1 point y/y

Q: Broader question on demand, commercial bookings, and how demand gets paid for.

A: Amy and Satya discussed models shifting from per-seat to licensed plus consumption, impact on bookings, and importance of value creation for usage.

Q: Elaborate on CapEx guidance.

A: Amy discussed confidence in working through physical component constraints, allocation across Azure and co-pilot usage, and acceleration in second half of calendar year.

Q: AI's potential for better margins.

A: Amy talked about consumption and usage-based models, leveraging IP, first-party hardware stack, and efficiency work.

Q: CapEx and revenue growth disconnect.

A: Amy discussed Azure growth, usage plus consumption models in apps/services, and revenue growth from M365 commercial cloud and GitHub.

Q: Reflections on Copilot adoption.

A: Sasha talked about Copilot form factors, usage levels, intelligence from multiple models and context.

Q: Change in OpenAI agreement.

A: Satya and Amy discussed positive aspects of the OpenAI partnership, IP royalty-free, revenue share through 2030, and model diversity.

Q: Seat-based models and consumption.

A: Amy talked about customers wanting predictability with seat-based pricing bundling consumption, and evaluation by business outcomes