Microsoft reported fiscal third-quarter revenue of $78.4 billion on Thursday evening, beating consensus of $75.6 billion by 3.7%, and earnings per share of $3.68 versus $3.41 expected. The standout disclosure came in the prepared remarks: Microsoft 365 Copilot paid subscribers crossed 100 million for the first time, an enormous acceleration from the 62 million reported in the January commentary and 24 million at the July 2025 fiscal year-end.
Shares jumped 6.8% in after-hours trading Thursday and closed at $521 on Friday, lifting Microsoft's market capitalization to $3.87 trillion. Azure and other cloud services revenue grew 38% year-over-year — well above the 32% consensus — and CEO Satya Nadella disclosed that "AI services contributed approximately 18 percentage points to Azure growth in the quarter."
AI Capex Guidance Raised Again
CFO Amy Hood raised full-year fiscal 2026 capital expenditure guidance to $92 billion from the prior $85 billion range, with fiscal 2027 capex now expected at "meaningfully above $100 billion." Hood emphasized that demand for Azure AI capacity continues to exceed supply despite the ongoing buildout, and the company is "in advanced negotiations for additional multi-gigawatt capacity with sovereign and hyperscaler partners."
The OpenAI partnership remains the single most important revenue driver. Microsoft disclosed that OpenAI-related transactions contributed approximately $5.8 billion to Q3 revenue — up from roughly $3.2 billion a year ago — across consumption of OpenAI models on Azure and OpenAI's enterprise licensing arrangements through Microsoft's sales channel.
Copilot Monetization Accelerates
The 100 million Copilot subscriber milestone translates to roughly $36 billion in annualized run-rate revenue at the standard $30-per-user-per-month enterprise price point, though the blended ASP is slightly lower given multi-user enterprise discounts. Nadella highlighted that 85% of Fortune 500 companies now have at least one paid Copilot seat, compared to 62% a year ago.
Analysts rushed to raise estimates. Morgan Stanley's Keith Weiss lifted his price target to $580 from $540, Bernstein went to $610, and Wedbush's Dan Ives moved to $650 from $600. The consensus fiscal 2026 EPS estimate has risen to $14.82 from $14.10 since the report. The Microsoft print sets a high bar for Google parent Alphabet,