Microsoft kept its calendar year 2026 capital expenditure outlook unchanged, becoming one of the first major data center operators to hold the line on AI infrastructure spending amid broader industry uncertainty1,2.
Revenue for the three months ended in June rose 18% year over year to $90 billion, beating the LSEG consensus estimate of $87.6 billion. Adjusted earnings per share came in at $4.74, up 30% from a year earlier.
Azure, Microsoft's cloud unit and primary vehicle for AI workload delivery, posted 43% revenue growth on both a constant-currency and reported basis, ahead of the FactSet consensus estimates of 40.26% and 40.4%, respectively. Microsoft guided Azure revenue growth to 45% in constant currency for the first quarter of fiscal year 2027.
On spending, Microsoft invested $41 billion in the quarter, including assets acquired under finance leases. The company expects capital expenditures to exceed $50 billion in the current quarter. An accounting change from finance to operating leases technically adjusts its capital expenditure expectations lower to $175 billion from $190 billion.
Microsoft produced $19 billion in free cash flow during the quarter and returned $3.4 billion to shareholders through share repurchases.
The company said a $51 billion sequential increase in commercial remaining performance obligation was driven by customer commitments outside of frontier AI model developers. ANALYSIS That detail is notable given persistent questions about whether Microsoft's cloud growth depends too heavily on its relationship with OpenAI; the company is signaling that enterprise demand beyond its largest AI partner is accelerating.
On the product side, Microsoft said M365 Copilot now has over 30 million paid seats. CEO Satya Nadella teased that a Copilot "super app" is coming later this quarter. Microsoft also added 31 new data centers across five continents during the quarter.
For fiscal first-quarter guidance, Microsoft expects total revenue between $89.85 billion and $90.95 billion, with Intelligent Cloud revenue between $40.95 billion and $41.25 billion, Productivity and Business Processes revenue between $36.7 billion and $37 billion, and More Personal Computing revenue between $12.2 billion and $12.7 billion. Operating expenses are expected between $16.8 billion and $16.9 billion.
Microsoft shares had dropped about 24% over the prior 12 months on concerns that the company had fallen behind in the AI race, with critics arguing it carried too much seat-based subscription software vulnerable to AI disruption and lacked innovation in its AI tools. The stock was rewarded Wednesday evening following the results.
The capex hold comes as Microsoft recently launched MAI-Cyber-1-Flash, its first cybersecurity-specialized AI model, alongside a new agentic security platform called Perception ctx. ANALYSIS The steady capex posture, combined with Azure growth outperformance and broadening enterprise commitments, provides a counter-narrative to the bear case that Microsoft's AI infrastructure buildout is outrunning demand.