Microsoft Q3 Revenue $82.9B; Azure Up 40%, Shares Drop

Microsoft reported $82.9 billion in revenue for the fiscal third quarter ended March 31, topping the $81.39 billion estimate. Azure and other cloud services grew 40%, and adjusted earnings per share were $4.27, above the $4.06 analysts expected. The stock fell about 3% on the report.

Sales increased 18% year over year, or 15% on a constant-currency basis. Operating income reached $38.4 billion, up 20% (16% cc). GAAP net income was $31.8 billion, a 23% rise. On a non-GAAP basis, profit rose 20% (18% cc). The company returned $10.2 billion to shareholders through dividends and share repurchases during the quarter.

Microsoft Cloud revenue totaled $54.5 billion, up 29% (25% cc). Intelligent Cloud revenue was $34.7 billion, up 30% (28% cc). The Azure and other cloud services line, which investors watch for AI-related demand, expanded 40% (39% cc). The company said its AI business surpassed an annual revenue run rate of $37 billion, up 123% year over year.

Revenue in Productivity and Business Processes was $35.0 billion, up 17% (13% cc). Microsoft 365 Commercial cloud revenue grew 19% (15% cc), while Microsoft 365 Consumer cloud revenue rose 33% (29% cc). LinkedIn revenue increased 12% (9% cc) and Dynamics 365 revenue grew 22% (17% cc).

More Personal Computing revenue was $13.2 billion, down 1% (3% cc). Windows OEM and Devices revenue declined about 2% (3% cc) and Xbox content and services revenue fell 5% (7% cc). Search advertising revenue, excluding traffic acquisition costs, rose 12% (9% cc).

Commercial remaining performance obligations, a measure of contracted future revenue, rose 99% to $627 billion.

Microsoft’s non-GAAP results excluded the impact of investments tied to OpenAI. The company recorded a $14 million adjustment this quarter versus a $583 million adjustment in the same period last year. Because the adjustment had no per-share effect, diluted EPS was $4.27 on both a GAAP and adjusted basis this quarter.

Satya Nadella, chairman and chief executive officer, highlighted the AI business performance, saying, “Our AI business surpassed an annual revenue run rate of $37 billion, up 123% year-over-year.” Amy Hood, executive vice president and chief financial officer, said the quarter exceeded expectations across revenue, operating income and earnings per share, citing strong execution and demand for the Microsoft Cloud.

Shares were down about 12% for 2026 after the quarter. Market participants are monitoring capital and operating expenses tied to AI as Microsoft scales data centers and cloud services to support large language models and enterprise AI deployments.