Microsoft Q3 2026 Earnings Review

Other reviews from this season include:

• SoFi
• Amazon
• Meta
• Lemonade
• Robinhood
• Alphabet
• Reddit
• ServiceNow
• Apple
• Spotify
• Taiwan Semi
• Netflix
• Tesla

a. Key Points

• 39% constant currency Azure growth despite ongoing supply constraints.
• Especially strong Microsoft 365 Copilot adoption.
• Aggressive CapEx will continue.

b. Demand

• Beat revenue estimate by 1.8% & beat guide by 2.1%.
  • Constant currency (CC) revenue growth was 15% Y/Y.
  • Productivity & Business Processes (PBP) revenue beat estimate by 1.7%.
  • Intelligent Cloud (IC) revenue beat estimate by 1.2%.
  • More Personal Computing (MPC) revenue beat estimate by 3.9%.
• Azure 39% *CC* growth beat 38% growth estimate & beat 37.5% growth guide.
• Unearned revenue met $53.7B estimates.
• RPO grows 99% Y/Y to $620 billion, with 25% of that expected to be recognized in the next 12 months. That 12-month portion rose by 39% Y/Y, with the rest of its RPO base rising 138% Y/Y.
• AI-related ARR rose 123% Y/Buy to $37 billion.

c. Profits

• Beat 67.1% GPM estimate by 50 basis points (1 basis point = 0.01%).
• Beat GAAP EBIT estimate by 4.1% & beat guidance by 5%.
  • EBIT rose by 16% Y/Y constant currency.
  • OpEx rose by 8% constant currency.
  • Headcount fell Y/Y.
• Beat $4.03 GAAP EPS estimate by $0.24 ex-OpenAI equity gains. 
  • EPS rose by 18% constant currency.
• Beat GAAP Operating Cash Flow (OCF) estimate by 20%.
• AI-related margins continue to trend higher than cloud margins did at the same stage of that growth curve’s maturity.

d. Balance Sheet