Microsoft Q3 FY 2026 results: AI revenue run rate reaches $37 billion as Azure growth accelerates
Microsoft reported strong fiscal third-quarter 2026 results, with revenue rising to $82.9 billion for the period ended March 31, 2026, up 18% year over year.
Operating income climbed to $38.4 billion and net income reached $31.8 billion, as the company said demand remained robust across cloud and AI.
Diluted earnings per share came in at $4.27, up 23% on a GAAP basis. Microsoft also said it returned $10.2 billion to shareholders during the quarter through dividends and share repurchases.
AI becomes a bigger business
CEO Satya Nadella said Microsoft is building infrastructure for what he called the agentic computing era, and disclosed that the company’s AI business has surpassed a $37 billion annual revenue run rate.
Microsoft said that figure represents 123% growth year over year, underscoring how quickly AI has moved from product feature to material revenue stream.
CFO Amy Hood said Microsoft delivered results above expectations on revenue, operating income, and earnings per share, pointing to execution and continued demand for Microsoft Cloud. The company positioned AI workloads as a key driver of both near-term consumption and longer-term commitments.
Azure and cloud demand stays strong
Microsoft Cloud revenue rose to $54.5 billion, up 29% year over year, as enterprise customers continued shifting spending to cloud services.
Commercial remaining performance obligation increased to $627 billion, reflecting contracted backlog that the company expects to recognize over time.
In Intelligent Cloud, revenue grew 30% to $34.7 billion, while Azure and other cloud services rose 40% year over year, or 39% in constant currency. Microsoft tied the outperformance to infrastructure demand, including capacity needs tied to AI training and inference.
OpenAI partnership details draw attention
On the earnings call, Nadella addressed the amended OpenAI partnership that has been closely watched by investors, emphasizing a long-term structure he described as mutually beneficial.
He said Microsoft has access to a frontier model on a royalty-free basis with IP rights extending through 2032 and highlighted OpenAI’s role as a major customer for compute.
Outside the cloud segments, More Personal Computing revenue slipped 1% to $13.2 billion, with Windows OEM and Devices down 2% and Xbox content and services down 5%. Search advertising revenue excluding traffic acquisition costs increased 12%, offering a partial offset to the softness.
