Microsoft cloud revenue hits $59.3B as AI capex keeps climbing
Microsoft posted $90B in quarterly revenue as Azure grew 43%, while Copilot reached 30M paid seats amid rising AI capex.
By Renata Fuchs · Policy Reporter
· 3 min read
Microsoft cloud revenue reached $59.3 billion in the quarter ended June 30, up 27% from a year earlier, as the company’s AI-heavy infrastructure buildout continued to translate into top-line growth. Total quarterly revenue was $90 billion, up 18% and ahead of Wall Street expectations, sending Microsoft’s shares more than 7% higher in after-hours trading Wednesday.
The quarter closed Microsoft’s fiscal 2026. Azure revenue grew 43%, and Microsoft said Azure passed $100 billion in annual revenue for the first time. CEO Satya Nadella also said Microsoft 365 Copilot surpassed 30 million paid seats, with its paid user base up 50% from the prior quarter.
That Copilot number is progress, but it is still a limited penetration figure against an estimated 450 million Microsoft 365 commercial customers. Microsoft also has usage-based billing layered on top of per-seat charges, which makes Copilot adoption a more complicated read than seat count alone. The company did not break out Copilot revenue.
How much did Microsoft make in the quarter?
Operating income was $40.6 billion, up 18%. Net income rose 31% to $35.8 billion, and diluted earnings per share increased 32% to $4.81. Microsoft’s investment in Anthropic contributed a gain of about $3.2 billion in the quarter.
For the full fiscal year, Microsoft reported $331.8 billion in revenue, also up 18%. Operating income was $155.2 billion, up 21%, while net income rose 31% to $133.7 billion. Full-year diluted earnings per share came in at $17.95, up 32%.
How much did Microsoft spend on AI infrastructure?
Capital spending remains the line investors are watching most closely. Microsoft’s capex reached $41 billion in the quarter, up 70% year over year and above the $31.9 billion reported in the prior quarter. CFO Amy Hood said on Microsoft’s investor call that roughly two-thirds of capex went to shorter-lived assets such as CPUs and GPUs. She also said finance leases accounted for about $5.6 billion of capex.
Finance leases let Microsoft add datacenter capacity without paying the full cash cost immediately. That structure can smooth near-term cash outflows, but it does not remove the longer-term obligation to make the infrastructure earn an adequate return.
Hood pointed to demand already committed but not yet recognized as revenue. She said commercial remaining performance obligation grew 84% to $678 billion and that demand for cloud services is running ahead of capacity.
Emarketer analyst Gadjo Sevilla, in a statement provided to The Register, said Microsoft’s capex arrived with a case for optimism rather than alarm. He noted that property and equipment spending was $35.80 billion in fiscal Q4, compared with $17.08 billion a year earlier, and that full-year capital expenditures reached $115.95 billion, up from $64.55 billion in fiscal 2025. Sevilla also cited $55.44 billion in quarterly operating cash flow, up 30% year over year, as evidence that the AI buildout has not yet impaired Microsoft’s core business.
The broader risk has not gone away. Fitch Ratings warned Monday that a potential AI market correction has become a material credit risk, citing uncertainty over revenue and the extent to which capital markets and economies are now tied to AI expectations. Microsoft’s quarter gives bulls revenue and cash flow to point to, but the company still has to prove that heavy datacenter spending can support durable AI returns beyond Azure growth and early Copilot seat adoption.
This story draws on original reporting from The Register.
