Microsoft Corporation today reported financial results for its third quarter of fiscal year 2026, ending March 31, 2026. The company posted total revenue of $82.9 billion, an 18% increase compared to the same period last year. Operating income rose 20% to $38.4 billion, while net income reached $31.8 billion. Diluted earnings per share stood at $4.27 on a GAAP basis, representing a 23% year-over-year increase.
The results were primarily fueled by the Microsoft Cloud, which generated $54.5 billion in revenue, up 29% from the previous year. Within this segment, Azure and other cloud services grew 39% in constant currency. Satya Nadella, Chairman and Chief Executive Officer of Microsoft, stated that the company’s AI business has surpassed an annual revenue run rate of $37 billion, a 123% increase year-over-year. Nadella emphasized that Microsoft is focused on delivering infrastructure and solutions for the agentic computing era, noting that AI workloads are becoming the dominant driver of growth across the tech stack.
In the Productivity and Business Processes segment, revenue reached $35.0 billion, a 17% increase. This growth was supported by the continued adoption of Microsoft 365 Copilot, which now has over 20 million paid seats, a 250% increase from the prior year. Office 365 Commercial revenue grew as organizations transitioned to higher-tier subscriptions and integrated AI-driven productivity tools. LinkedIn revenue also increased by 12%, with growth across all lines of business.
The Intelligent Cloud segment, which includes Azure, server products, and enterprise services, reported revenue of $34.7 billion, up 30%. However, the More Personal Computing segment saw a slight decline of 1%, with revenue totaling $13.2 billion. This was impacted by a 2% decrease in Windows OEM and Devices revenue, though Xbox content and services continued to benefit from the integration of Activision Blizzard.
Chief Financial Officer Amy Hood highlighted that demand for AI and cloud services continues to outpace available supply. To address these bottlenecks, Microsoft increased its capital expenditures to $31.9 billion during the quarter, primarily for data center expansion and AI infrastructure. Hood confirmed that the company expects to remain capacity-constrained through the remainder of calendar year 2026. Despite the heavy investment, Microsoft maintained an operating margin of 46.3%, up from 45.7% a year ago.
Microsoft returned $10.2 billion to shareholders through dividends and share repurchases during the third quarter. The company also disclosed that its investment in OpenAI resulted in a net loss of $14 million for the quarter, a significant reduction from the $583 million loss reported in the same period of the previous year. For the upcoming fourth quarter, Microsoft provided revenue guidance between $86.7 billion and $87.8 billion.